FORM OF
SPECIAL CUSTODY ACCOUNT AGREEMENT
(SHORT SALES)
This Special Custody Account Agreement (this "Agreement"), dated as of
, by and among Hillview Investment Trust II (the "Customer), a
Delaware statutory trust, (the "Customer") with its principal place of business
at 000 Xxx Xxxxx Xxxxxxxx, Xxxxxxx, XX 00000; PFPC Trust Company, a limited
purpose trust company organized under the laws of the State of Delaware with its
principal place of business at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxxxxx, XX (the
"Custodian"), and National Financial Services LLC, organized as a limited
liability company under the laws of Delaware with its principal place of
business at 00 Xxxxxxxxxx Xxxxxx, Xxxxxx, XX ("Broker").
WHEREAS, Customer is an open-end mutual fund registered with the U.S.
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940 (as amended from time to time, the "1940 Act"), which is permitted by
applicable law and its own governing documents and investment policies to
purchase and sell securities on margin through broker-dealers;
WHEREAS, Broker is a broker-dealer registered with the SEC under
Section 15 of the Securities Exchange Act of 1934 (as amended from time to time,
the "1934 Act"), and is a member of the National Association of Securities
Dealers ("NASD") and several national securities exchanges including the New
York Stock Exchange ("NYSE"), and extends credit to clients such as Customer in
accordance with the provisions of Regulation T of the Board of Governors of the
Federal Reserve System ("Regulation T"), the margin rules of the NASD and NYSE,
other such self-regulatory entities and the various exchanges, and other
applicable margin requirements (collectively, the "Margin Rules");
WHEREAS, Customer acting for a series of its fund known as REMS Real
Estate Value-Opportunity Fund, desires to execute securities transactions from
time to time through Broker, including primarily, but not limited to, the sale
of securities which the Customer does not own at the time of such sale, using
securities borrowed from or through Broker;
WHEREAS, Customer has agreed to pledge, from time to time, a portion of
the securities which comprise its total portfolio of assets to Broker to secure
performance of Customer's obligations with respect to Short Sales (as defined
below), to execute the Broker's form of margin account application and agreement
and to open a brokerage account with Broker, in which Customer shall be
permitted to trade on margin and to execute Short Sales;
WHEREAS, Custodian has agreed to maintain the Collateral for Broker
pursuant to the terms of this Agreement and to open one or more Special Custody
Accounts (as defined in Section 2(a) below);
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NOW, THEREFORE, Customer, Custodian and Broker hereby agree as follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
(1) "Adequate Margin" means Collateral having such value as is adequate,
under the Margin Rules and in accordance with the internal policies of Broker,
to secure the Secured Obligations. For purposes of this definition, Collateral
shall be valued by Broker as specified in Section 2(a) below.
(2) "Advice from Broker" or "Advice" means a written notice sent or
transmitted by a facsimile sending device by Broker to Customer or Custodian,
except that the Advice sent to Customer (i) requesting initial or additional
Collateral, or (ii) with respect to Broker's ability to effect a Short Sale for
Customer, may be given orally by Broker to a person designated by Customer in
writing (which shall not be Custodian) as its authorized representative to
receive such Advice (or, in the event such person is not available, to any
officer of the Customer duly authorized thereby for such purposes. With respect
to any Short Sale or Closing Transaction, the Advice from Broker shall mean a
confirmation in the form normally used by Broker for that type of transaction.
An authorized agent of Broker will certify to Customer and Custodian the names
and signatures of Broker's employees who are authorized to sign an Advice from
Broker, which certification may be amended from time to time. When used herein,
the term "Advise" means the act of sending an Advice from Broker.
(3) "Business Day" shall mean a day on which Custodian, Customer and
Broker are each open for regular business.
(4) "Closing Transaction" is a transaction in which Customer purchases
securities which have previously been sold short by Customer, in order to close
out a Short Sale.
(5) "Collateral" shall mean any Security or Security Entitlement having
loan value under the Margin Rules; subject, however, to Broker's right to value
such Collateral in accordance with Section 2(a) below.
(6) "Control" shall have the meaning assigned to such term in Section
8-106 of Revised Article 8.
(7) "Control Rule" means Rule 15c3-3 (as amended from time to time)
promulgated under the 0000 Xxx.
(8) "Default" has the meaning assigned to that term in Section 5 below.
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(9) "DTC" means the Depository Trust Company or any successor thereto.
(10) "DTC Participant" means any Person that is eligible to maintain,
and does maintain, one or more accounts with DTC or a Person having an
affiliated company of such Person who maintains such a DTC account used for such
Person.
(11) "Entitlement Holder" shall have the meaning assigned to such term
in Section 8-102(a)(7) of Revised Article 8.
(12) "Entitlement Order" shall have the meaning assigned to such term in
Section 8-102(a)(8) of Revised Article 8.
(13) "Fed" means a Federal Reserve Bank.
(14) "Fed Member" means any Person that is eligible to maintain, and
does maintain, one or more book-entry accounts in the name of such Person with
the Fed or a Person having an affiliated company of such Person who maintains
such a Fed account used for such Person.
(15) "Federal Book Entry Regulations" means the provisions for the
creation and perfection of security interests in Federal Book Entry Securities
contained in (or contained in regulations substantially identical to) Subpart O,
31 C.F.R. 306.115 through 306.122.
(16) "Federal Book Entry Securities" means Collateral and other
securities maintained in the form of entries on the records of the Fed.
(17) "Insolvency" as applied to Customer means that: (i) Customer shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or (ii)(A) any proceeding shall be instituted by or
against Customer seeking (under any law relating to bankruptcy, insolvency or
reorganization, relief of debtors or similar law, whether now or hereafter from
time to time in effect in the United States, any State or politic subdivision
thereof or any other jurisdiction)(1) to adjudicate it bankrupt or insolvent or
(2) the liquidation, dissolution, winding-up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts or (3) the
entry of an order for the relief against, or the appointment of a trustee,
receiver, custodian, liquidator or similar official for, it or any substantial
part of its property and (B) in the case of any such proceeding instituted
against it (but not instituted by it) that is being contested by it in good
faith, either such proceeding shall remain un-dismissed or un-stayed for a
period of sixty (60) days or more, or any of the actions sought in such
proceedings (including without limitation, the entry of an order for relief
against, or the appointment of a trustee, receiver, custodian, liquidator or
similar official for, it or any substantial part of its property) shall occur;
or (iii) Customer shall take any corporate or other action to authorize, or
shall approve, consent to or acquiesce in, any of the actions set forth above in
this definition.
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(18) "Instructions from Customer" or "Instructions" means a request,
direction or certification in writing signed by Customer and delivered to
Custodian or Broker or transmitted thereto by a facsimile sending device. An
officer of Customer will certify to Custodian and Broker the names and
signatures of those persons authorized to sign the Instructions, which
certification may be amended from time to time by Customer, but shall only
become effective with respect to instructions sent to Broker or Custodian when
acknowledged by Broker or Custodian as applicable.
(19) "Instruct" shall mean the act of Customer's sending an Instruction
to Custodian or Broker.
(20) "Margin Account" means an account opened by Customer with Broker
and approved by Broker for trading on margin, in accordance with the terms of
the Margin Agreement.
(21) "Margin Agreement " means the Broker's form of Margin Account
Application and Agreement, which is entered into between Customer and Broker to
open a Margin Account with Broker.
(22) "NYUCC" means the Uniform Commercial Code, as then in effect in the
State of New York.
(23) "Person" means an individual, partnership, corporation, firm,
business trust, joint stock company, trust, unincorporated or other association,
joint venture, company, division of a corporation, governmental authority or
other entity of whatever nature.
(24) "Revised Article 8" means Article 8 of the NYUCC, as then in effect
in the State of New York.
(25) "Revised Article 9" means Article 9 of the NYUCC, as then in effect
in the State of New York.
(26) "Right" (or "Rights") means any lien, security interest, pledge,
charge, encumbrance, claim, setoff right, ownership or property right, title or
interest (including, without limitation, such as has been obtained by sale,
transfer, assignment, conveyance, contribution, exchange or other disposition)
or other right, title or interest of any kind (including, without limitation,
Broker's Security Interest as provided in Section 2(b) below).
(27) "Secured Obligations" means any and all obligations of Customer to
Broker (whether now existing, or arising from time to time hereafter), under the
terms of the Margin Agreement or this Agreement, which are secured by the
Collateral and other assets in the Special Custody Account(s).
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(28) "Security" (or "Securities") shall have the meaning assigned to
that term in Section 8-102(a)(15) of Revised Article 8; provided, however, that
such terms shall include a Security Entitlement or Security Entitlements except
where otherwise specifically provided or where the context otherwise requires.
(29) "Security Entitlement" shall have the meaning assigned to that term
in Section 8-102(a)(17) of Revised Article 8.
(30) "Security Interest" shall have the meaning assigned to that term in
Section 2(b) below.
(31) "Short Sale" (or Short Sales") shall mean any sale by the Customer
of a security which the Customer does not own or any sale which is consummated
by the delivery of a security borrowed from or through the Broker.
(32) "Uncertificated Security" (or "Uncertificated Securities") shall
have the meaning assigned to that term in Section 8-102(a)(18) of Revised
Article 8.
2. SPECIAL CUSTODY ACCOUNTS
(a) Opening Special Custody Accounts. Custodian, in its capacity as a
Securities Intermediary (as defined in Section 8-102(a)14 of Revised Article 8),
shall open one or more (at the request of Customer and Broker) separate special
custody accounts on its books, each such account to be entitled "Special Custody
Account for National Financial Services LLC, for the benefit of Hillview REMS
Leveraged REIT Fund; Collateral for Margin and Short Sales Activity" (each a
"Special Custody Account") and shall hold in each Special Custody Account, upon
the terms of this Agreement, all of the Collateral (subject to the Security
Interest of Broker) and all monies or other property paid on or distributed with
respect thereto (subject, however, to the rights of the Customer in or to any
such monies or property set forth in Section 4(b) hereof) or realized on the
sale of any portion thereof.
Each Special Custody Account shall be a Securities Account (as defined
in Section 8-501(a) of Revised Article 8) in the name of the Customer and within
the sole dominion, control and Control of Broker, subject to the terms of this
Agreement. Customer shall deposit Collateral, as required by Broker to meet
Adequate Margin requirements, into each Special Custody Account. Customer agrees
to Instruct Custodian (and Custodian agrees to comply with such Instructions) to
deposit the cash (U.S. dollars) and specific domestic securities which Customer
shall be pledging to Broker into each Special Custody Account, and Custodian
agrees (subject to the terms hereof) to maintain such cash and securities in the
Special Custody Accounts identified by Customer for such purposes.
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Custodian shall (1) identify such deposited cash and securities on its
books and records as being subject to the Security Interest (as defined in
Section 2(b) below) of the Broker, (2) hold such cash and securities as
Securities Intermediary hereunder, (3) treat such securities, for purposes of
Revised Article 8, as Financial Assets (as defined in Section 8-102(a)(9)
thereof ), to the extent that Revised Article 8 may be applicable thereto, and
(4) release such cash and securities only in accordance with the terms of this
Agreement or as required by applicable law. The Custodian shall take such
actions with respect to any Collateral and other assets in the Special Custody
Account(s) (including without limitation the delivery thereof to Broker without
the payment of money or value, if so requested by Broker), as Broker shall, in
accordance with the terms hereof, so direct in an Advice from Broker, and in no
event shall any consent of Customer be required for the taking of any such
action by Custodian.
For purposes of this Agreement, Broker shall determine the value of the
Collateral and other assets in the Special Custody Account(s) as it shall
determine from time to time in its sole discretion, and Broker retains the right
to give no value to certain Collateral as it may deem necessary for its
protection. Customer shall ensure that the value, as so determined, of the
Collateral on deposit at any time in any Special Custody Account is at least
equal to the Adequate Margin for the Secured Obligations related thereto.
Customer represents and warrants to Broker that the Collateral shall be at all
times in good, freely deliverable and transferable form (or Custodian shall have
the unrestricted power to put such securities into good, freely deliverable and
transferable form) in accordance with the requirements of such exchanges and
other markets as may be the primary market or markets for such Collateral.
(b) Security Interest. Customer hereby grants to Broker a continuing
lien on and security interest (the "Security Interest") in: (i) all Collateral
and any proceeds thereof and distributions thereon; (ii) any other property in
any Special Custody Account; and (iii) its Margin Account and other accounts
with Broker (if any), to secure the Customer's obligations to Broker under this
Agreement and the Margin Agreement.
(c) Deposit of Collateral by Customer. Broker shall notify Customer in
an Advice when the value (or type and/or amount, if applicable) of Collateral on
deposit in any Special Custody Account is inadequate to secure Customer's
Secured Obligations related thereto. Upon an Advice from Broker that the value
(or type and/or amount, if applicable) of the Collateral in any Special Custody
Account is less than the Adequate Margin for such Secured Obligations, Customer
shall promptly deposit therein additional Collateral with a value sufficient to
remedy such deficiency.
(d) Release of Collateral by Custodian; Excess Collateral. Custodian
agrees to release Collateral or other assets to the Customer from any Special
Custody Account only upon receipt of an Advice from the Broker. Broker shall
periodically and upon request notify Customer and Custodian in an Advice when
the Collateral in any Special Custody Account is in excess of the Adequate
Margin then required for the Secured Obligations related thereto. At
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Customer's or Custodian's request, Broker shall direct Custodian (via an Advice
to Custodian for such purposes) to transfer such excess Collateral in an amount
and value determined by broker from such Special Custody Account to another
account of Customer's at Custodian. Notwithstanding the foregoing, customer
understands that the value of the Collateral remaining in such Custody Account
must still constitute Adequate Margin to secure Broker's Secured Obligations.
(e) Substitution of Collateral. Upon request of the Customer, Broker
agrees to permit an item or items of Collateral or other assets in any Special
Custody Account to be released from such Special Custody Account (and shall
promptly provide an Advice from Broker to Custodian for such purposes) upon the
deposit into such Special Custody Account by the Customer of additional
Collateral sufficient to maintain the value of the Collateral in the Special
Custody Account in an amount which is at least equal to Adequate Margin as
determined by Broker. Such Advice will not be given prior to the deposit of such
additional Collateral. The item or items of Collateral so released by Broker
shall be transferred from the applicable Special Custody Account to an account
of Customer at Custodian.
(f) Confirmations. Custodian will (1) confirm in writing to Broker and
Customer, within one Business Day, all pledges, releases or substitutions of
Collateral, and (2) will supply Broker and Customer with a monthly statement of
Collateral in the Special Custody Account(s) and the transactions in each
Special Custody Account during the preceding month. Custodian will also advise
Broker or Customer, upon either one's request at any time, of the kind and
amount of Collateral in any Special Custody Account, it being understood that
Custodian shall have no responsibility to value any assets in any Special
Custody Account.
(g) Accounts and Records. Custodian shall maintain accounts and records
for the Collateral in each Special Custody Account in accordance with laws and
regulations applicable to it and in accordance with its duties under this
Agreement. Custodian confirms and agrees that it will make entries in its books
of account showing Broker's first priority Security Interest in the Collateral.
The Collateral and other assets in the Special Custody Account(s) shall be the
property of the Customer, but subject to the rights and interests of the Broker
set forth herein.
3. CUSTOMER'S USE OF MARGIN FOR SHORT SALES.
(a) Short Sales. Promptly following execution of this Agreement by the
parties hereto, Customer shall execute a Margin Agreement and shall open a
Margin Account with Broker. From time to time, Customer may place orders in its
Margin Account for Short Sales and may conduct all other activities permitted
therein under the Margin Agreement. Prior to the acceptance of any such orders,
Broker shall advise Customer of Broker's ability to borrow securities, or other
properties if applicable, and acceptance of Short Sale orders by the Broker
shall be contingent thereon.
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It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such,
and Customer hereby authorizes Broker to xxxx such order as being "short". When
placing with Broker any order to sell long for Customer's account, Customer will
designate the order as such and hereby authorizes Broker to xxxx such order as
being "long". Any sell order which Customer shall designate as being for its
long account, as provided above, is for securities then owned by Customer. If
such securities are not then deliverable by Broker from any account of Customer,
the placing of such order shall constitute a representation by Customer that it
is impracticable for Customer to deliver such securities to Broker at that time,
but that Customer shall deliver them by the settlement date, or as soon as
possible thereafter (but, in any event, on or before the day required for
delivery under the Margin Rules).
4. RIGHTS AND DUTIES OF CUSTODIAN.
(a) Generally. Custodian shall receive and hold in the Special Custody
Account(s), as Securities Intermediary and upon the terms of this Agreement, all
Collateral and other assets deposited into the Special Custody Account and,
except as provided in Section 4(b) below, shall receive and hold in the Special
Custody Account(s) property paid on, distributed on or substituted in respect of
such Collateral or realized on the sale or other disposition of such Collateral;
provided, however, that Custodian shall have no duty to require any securities
to be delivered to it or to determine that the value amount or form of assets
delivered to it comply with any applicable requirements.
Custodian may hold the assets in each Special Custody Account in
bearer, nominee, Federal Book Entry or other book entry form or Security
Entitlement or other form and in DTC or another depository or clearing
corporation, with or without indicating that the assets are being held pursuant
to this Agreement; provided, however, that all Collateral and other assets held
in the Special Custody Account(s) shall be identified on Custodian's records as
subject to this Agreement and Broker's first priority Security Interest therein,
and shall be in a form that permits transfer without additional authorization or
consent of Customer. Customer hereby agrees to hold Custodian and its nominee
harmless from any liability as holder of record of the Collateral or other
assets in any Special Custody Account.
(b) Dividends and Interest. Any dividends paid on, distributions
(including stock, if applicable) made on or interest paid with respect to the
Collateral or other assets held in any Special Custody Account shall, when
collected, be paid by Custodian to Customer or Customer's designee; provided,
however, that upon Advice of Broker to Custodian that a Default, as defined in
Section 5 hereof, has occurred and is continuing (and so long as Broker shall
not have sent an Advice to Custodian that such Default is no longer continuing),
Custodian shall hold or release such dividends, distributions and interest in
accordance with the terms thereof.
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(c) Security Interest. Custodian shall have no responsibility for the
validity or enforceability of the Security Interest.
(d) Limitation of Custodian's and Broker's Liability. Custodian's
duties and responsibilities are only as set forth in this Agreement. Subject to
Section 4(b) above, Custodian shall act only upon receipt of an Advice from
Broker regarding release or substitution of Collateral (which Advice will not be
unreasonably withheld). Custodian shall not be liable or responsible for
anything done, or omitted to be done, by it in good faith and in the absence of
gross negligence, and may rely upon (and shall be protected in acting upon) any
Advice, notice, Instruction or other communication which it reasonably believes
to be genuine and authorized. As between Custodian and Broker, Broker shall
indemnify and hold Custodian harmless with regard to any losses or liabilities
of Custodian (including reasonable counsel fees) arising out of any act or
omission of Custodian in accordance with any notice or instruction of Broker
under this Agreement, including any Advice therefrom, except for losses or
liabilities arising out of Custodian's gross negligence, recklessness, willful
misconduct or bad faith.
Notwithstanding anything in this Agreement to the contrary, Broker
shall have no liability for any special, indirect or consequential damages,
whether or not the likelihood of such loss or damage was known by Broker. Broker
shall have no liability for losses or damages occurring by reasons directly or
indirectly outside of Broker's control. The Customer shall indemnify Custodian
for, and hold it harmless against, any loss, liability or expense incurred by
Custodian, without negligence, willful misfeasance or bad faith on the part of
Custodian. Notwithstanding anything in this Agreement to the contrary, Custodian
shall have no liability for any special, indirect or consequential damages,
whether or not the likelihood of such loss or damages was known by Custodian.
Custodian shall have no liability for loss or damages occurring by reasons
directly or indirectly outside of Custodian's control. In matters concerning or
relating to this Agreement, Custodian shall not be responsible for compliance
with any statute or regulation regarding the establishment or maintenance of
margin credit, including but not limited to Regulation T and the other Margin
Rules, or with any rules or regulations of the SEC . Custodian shall not be
liable to any party for any acts or omissions of the other parties to this
Agreement nor for compliance or non-compliance by Broker or Customer with the
terms of this Agreement or for compliance or non-compliance with any other
agreement to which Custodian is not a party.
(e) Compensation. Custodian shall be paid by Customer for its services
pursuant to this Agreement such compensation as may from time to time be agreed
upon in writing between Customer and Custodian.
5. DEFAULT
In the event (each a "Default") of: (i) failure by Customer to perform
any obligation (a) under this Agreement, including, without limitation, the
failure to maintain Adequate Margin in
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any Special Custody Account as herein required, (b) under the Margin Agreement,
including, without limitation, the failure to return to Broker, in a timely
manner (as specified in the Margin Agreement and/or the Margin Rules) identical
securities to the ones previously borrowed from or through Broker by Customer to
conduct a Short Sale (whether or not Customer has received notice of such
recall, provided that the Broker has complied with the terms of the Margin
Agreement and the Margin Rules); (ii) material breach by Customer of any of its
representations, warranties or covenants contained in Section 8 hereof; or (iii)
Customer's Insolvency, then, upon any such Default, Broker shall have the right
to:
(1) Effect a Closing Transaction for or a buy-in of any Securities.
(2) Remove any Collateral or other assets from any Special Custody
Account and register such Collateral or other assets in Broker's name or in the
name of Broker's Financial Intermediary, Securities Intermediary, agent or
nominee (not including Custodian) or any of their nominees;
(3) Exercise any voting, conversion, registration, purchase or other
Rights of a holder of any Collateral or other assets in a Special Custody
Account, and any reasonable expense of such exercise shall be deemed to be an
expense of preserving the value of such Collateral and shall constitute a
Secured Obligation hereunder;
(4) Collect, including by legal action, any notes, checks or other
instruments for the payment of money included in the Collateral or other assets
in a Special Custody Account and compromise or settle with any obligor of such
instruments; and
(5) Exercise any and all rights and remedies provided under the Margin
Agreement, Revised Article 8 and Revised Article 9 (or any other applicable
Articles of the NYUCC) or otherwise available to the Broker under applicable
law.
Broker shall not sell any Collateral or other assets held in any
Special Custody Account under this Section 5 until and unless there has been a
Default, as defined above. Moreover, Broker shall not be entitled to exercise
any right in (2) through (5) above except upon providing Custodian an Advice
from Broker, stating that the conditions precedent to Broker's right to receive
Collateral (including without limitation all proceeds thereof) and all other
assets in the Special Custody Account free of payment have occurred. Upon
receiving such an Advice from Broker, Custodian shall promptly deliver such
Collateral and other assets free of payment to Broker. Custodian shall also
provide prompt telephone notice to Customer of any receipt by Custodian of such
an Advice from Broker (Custodian's failure to contact Customer, however, shall
not prohibit such delivery of Collateral and other assets to Broker).
Each sale or purchase of Collateral may be made according to Broker's
judgment and may be made at Broker's discretion, on the principal exchange or
other market on which such
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Collateral normally trades, or in the event such principal exchange or market is
closed, in a manner commercially reasonable for selling such Collateral.
6. LIMITATION OF BROKER'S LIABILITY TO CUSTOMER
Broker shall not be liable to Customer for any losses, costs, damages,
liabilities or expenses suffered or incurred by Customer as a result of any
transaction executed hereunder, or any other action taken or not taken by Broker
hereunder for Customer's account at Customer's direction or otherwise, except to
the extent that such loss, cost, damage, liability or expense is the result of
Broker's willful misconduct, or bad faith. The Customer shall indemnify Broker
for, and hold it harmless against, any loss, liability or expense incurred by
Broker, without gross negligence, willful misfeasance or bad faith on the part
of Broker.
7. CUSTODIAN'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Custodian represents, warrants and covenants that:
(a) it is duly organized and in good standing as a limited purpose
trust company under the laws of the State of Delaware, and has made and shall
continue to timely make all filings required thereby.
(b) it is, and shall continue to maintain its status as, a limited
purpose trust company under and subject to the applicable requirements of
Delaware law and as a bank, as such term is defined in Section 3(a)(6) of the
1934 Act, and Custodian shall promptly notify Broker if it loses such status or
it believes or has reason to believe that it shall or may do so at some point in
the future.
(c) Custodian is and will at all times remain, and will at all times
maintain the Special Custody Accounts and all Collateral in its capacity as, (1)
a Financial Intermediary and a Securities Intermediary having acknowledged
Broker's Security Interest, and (2) as appropriate, a DTC Participant or a Fed
Member. Custodian shall maintain all Collateral in its possession or, as
applicable, with the DTC, the Fed or any such other clearing corporation as
Broker may agree on with Custodian. Custodian shall assure (in accordance with
industry practice) that all Collateral maintained by Custodian with or through
the DTC or any other clearing corporation (other than the Fed) is appropriately
reflected in Custodian's Customer accounts with the DTC or other such clearing
corporation. Custodian shall also assure (in accordance with industry practice)
that all Collateral consisting of Federal Book Entry Securities is appropriately
reflected in Custodian's Customer book entry accounts with the Fed, including,
without limitation, by virtue of the Fed making appropriate entries in its
records with respect to such Collateral, all in accordance with the Federal Book
Entry Regulations.
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(d) Custodian shall cause each Special Custody Account and the
Collateral and other assets contained therein to be maintained separately on its
books and records from all other accounts, cash, assets, properties, rights and
items (including, without limitation, any other Special Custody Account and
other Collateral).
(e) This Agreement is the legal, valid and binding obligation of
Custodian, enforceable against Custodian in accordance with its terms.
(f) The delivery of the Collateral to the Broker does not require the
payment of money or value to the Custodian and the Custodian acknowledges that
the Collateral in its custody or control is not subject to any right, charge,
security interest, lien or claim of any kind in favor of the Custodian or any
person claiming through the Custodian. Custodian hereby waives any right,
charge, security interest, lien or right to set-off of any kind which it may
have or acquire with respect to any of the Collateral. Custodian shall use
reasonable efforts to notify Broker and Customer as soon as reasonably possible
if it receives any notice of xxxx, xxxx or court order purporting to affect the
Collateral.
(g) Each Special Custody Account is, and shall (and Custodian has
taken and shall continue to take all steps to ensure, in accordance with
industry practice, that such Special Custody Account shall) at all times remain,
under the sole dominion and control of Broker, subject to the terms of this
Agreement.
(h) Custodian will treat all Collateral as Financial Assets, and will
treat Broker as entitled to exercise any and all Rights, and to benefit from any
and all property interests, that comprise such Financial Assets (including,
without limitation, the Rights and property interests constituting Security
Entitlements with respect to such Financial Assets specified in Part 5 of
Revised Article 8), subject to the terms of this Agreement. Custodian shall hold
all Collateral for the benefit of Broker in its capacity as secured party
hereunder in accordance with the terms hereof, shall (subject to the terms of
this Agreement) comply with any and all Entitlement Orders originated by Broker
(without further consent by Customer, any other Entitlement Holder or any other
Person), shall (subject to the terms of this Agreement) accept instructions as
to the disposition of the Collateral and any other Entitlement Orders only from
Broker and from no other Person (whether from Customer, any other Entitlement
Holder or any other Person), and shall not release to Customer or any other
Person (except as otherwise specified in this Agreement), dispose of, or pledge,
re-pledge, hypothecate or re-hypothecate, or otherwise apply to the benefit of
Custodian, Customer, any other Entitlement Holder or any other Person, any of
the Collateral without the prior written consent of Broker thereto.
8. CUSTOMER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Customer represents, warrants, and covenants that:
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(a)(i) it is duly organized and in good standing as a statutory trust
under the laws of the State of Delaware (ii) it is duly registered as an
investment company under the 1940 act; (iii) it has all rights, power and
authority to enter into this Agreement; (iv) it conducts its business in
accordance with applicable laws and regulations; and (v) it agrees to notify
Broker promptly of any condition that may reasonably be expected to prevent
Customer from fulfilling its obligations hereunder.
(b) Customer is and at all times during the life of this Agreement
shall be the lawful legal or beneficial owner of the Collateral, with full power
and authority to grant the Security Interest to Broker and to bestow upon Broker
all the rights and remedies thereunto appertaining under applicable law or
pursuant to this Agreement, to sell, transfer, assign, convey, contribute or
otherwise dispose of, subject to the Security Interest and otherwise to deal
with (in accordance with this Agreement and the Margin Agreement) the Special
Custody Accounts and the assets therein which may from time to time constitute,
or purport to constitute, Collateral, free of any and all Rights whatsoever
(other than the Security Interest). Securities pledged to Broker as Collateral
shall be in good deliverable form or Custodian shall have the unrestricted power
to put such securities into good deliverable form, and the Collateral will not
be subject to any liens or encumbrances other than the lien in favor of Broker
contemplated hereby.
(c) The Collateral is and will be freely transferable and assignable,
and no portion of the Collateral is or will be subject to any option, right of
first refusal, shareholders agreement, charter or by-law provision, declaration
of trust or other contractual restriction of any nature which might prohibit,
impair, delay or otherwise affect the pledge of the Collateral hereunder, or the
sale or disposition of the Collateral pursuant hereto after the exercise by
Broker of any of its rights and remedies hereunder.
(d) This Agreement constitutes the legal, valid and binding obligation
of Customer, enforceable against Customer in accordance with its terms.
(e) The Broker has, and will have, a valid and enforceable perfected
first-priority lien on and security interest in the Collateral, securing the
Secured Obligations. Customer has taken and shall continue to take all steps to
ensure that each Special Custody Account is, and will at all times remain, under
the dominion and Control of Broker.
(f) The execution, delivery and performance of this Agreement and the
Margin Agreement, the grant of the Security Interest hereunder and the
consummation of the transactions contemplated hereby or thereby do not and will
not (i) violate any law, rule, regulation, judgment, writ, injunction or order
of any court or governmental authority, in each case applicable to Customer,
(ii) violate or result in the breach of or default under the charter, bylaws or
other organic documents of Customer, or any other agreement to which Customer is
a party or by which any of its properties or the Collateral are bound, or (iii)
violate any restriction on the transfer of any of the Collateral.
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(g) No consent, approval, license, permit or authorization of any
Person or any governmental authority is requested or required for the valid
execution, delivery and performance of this Agreement and the Margin Agreement,
the creation and perfection of the Security Interest or the valid and effective
exercise by Broker of the Rights available to it under this Agreement, the
Margin Agreement or at law.
(h) Customer hereby appoints and constitutes Broker, its successors and
assigns as Customer's agents and attorneys-in-fact for the purpose of carrying
out the provisions of this Agreement and of taking any action or executing any
instrument that Broker considers necessary or desirable for such purpose,
including, whether or not a Default has occurred, the power to endorse and
deliver Securities certificates in the name and on behalf of Customer, to
execute and deliver instructions in the name and on behalf of Customer to the
issuers of Uncertificated Securities and to execute and file in the name and on
behalf of Customer financing statements (which may be photocopies of this
Agreement) and continuations and amendments to financing statements in any State
of the United States, as well as Forms 3, 4, 5 and 144 and Schedules 13D and 13G
under the Securities Act of 1933 or the 1934 Act with the SEC; provided,
however, that Broker shall have no obligation to Customer to make any such
filings unless Broker specifically agrees to do so at the request of Customer,
and so informs Customer in an Advice which identifies specifically which filing
Broker shall make and stating that Broker has agreed to make such filing at
Customer's request. If Customer fails to perform any act required by this
Agreement, Broker may perform such act in the name and on behalf of Customer, at
Customer's expense, which shall be chargeable to Customer and shall constitute a
Secured Obligation.
(i) Customer shall not, without the written consent of Broker, take any
action in respect of the Collateral if such action would require the release of,
or would adversely affect, any Collateral, the Security Interest therein or
Broker's rights therein or with respect thereto.
(j) Any Rights that Customer may have in the Collateral shall be
subject in all respects to the Security Interest in accordance with this
Agreement.
9. TERMINATION
(a) Any of the parties hereto may terminate this Agreement for any
reason upon thirty (30) days notice in writing to the other parties hereto;
provided, however, that (i) the status of any Short Sales, and of Collateral and
other assets maintained in the Special Custody Account(s) held at the time of
such notice to margin any such Short Sales or other transactions of Customer,
shall not be affected by such termination until such Collateral and other assets
have held by Custodian pursuant to this Agreement and the Margin Agreement been
released either in accordance with the terms of this Agreement or pursuant to
applicable law or applicable rules or regulations of any self-regulatory
organization to which Broker is subject; (ii) Customer shall not be entitled to
terminate this Agreement unless and until Customer shall have indefeasibly paid
in full in cash to Broker all Secured Obligations then outstanding; and (iii)
Custodian shall not be
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entitled to terminate this Agreement until (A) a successor special custody
account has been established for each Special Custody Account on terms
acceptable to Broker, and the Collateral and other assets in each Special
Custody Account have been delivered to such successor special custody account or
(B) Customer's open positions with Broker secured by Collateral and other assets
in the Special Custody Account(s) on the date of receipt of Custodian's notice
of resignation have been closed out or transferred from Broker to another
broker.
(b) The Security Interest shall terminate (i) with respect to
Collateral or other assets released or paid pursuant to this Agreement, upon
such release or payment, and (ii) in any other case, upon the indefeasible
payment in full in cash to Broker of all Secured Obligations then outstanding.
Any Collateral or other assets in which the Security Interest shall have
terminated in accordance with the preceding sentence shall be transferred to
Customer or its designee.
(c) Broker agrees that it will, at the request of Customer, use its
best efforts to enter into an agreement substantially similar to this Agreement
with another custodian acceptable to Broker, and Broker and Customer may
thereafter use such other custodian to perform the functions of Custodian
hereunder with respect to some or all transactions thereafter effected by Broker
on behalf of Customer.
10. NOTICES
Written communications hereunder shall be telegraphed, sent by
facsimile transmission or hand delivered as required herein, or when another
method of delivery is not specified, may be mailed first class postage prepaid,
except that written notices of termination shall be sent by certified mail, in
each case addressed to the address of the party receiving such notice at the
address set forth below (and permitted oral communications shall be directed to
the telephone number which accompanies such address):
(a) If to Custodian, to: PFPC Trust
Company 0000 Xxxxxxx Xxxx., 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile: 000-000-0000
(b) If to Customer, to: Hillview REMS
Leveraged REIT Fund 000 Xxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000 Attn: Xxx
Xxxxxxx
(c) If to Broker, to: National Financial
Services LLC Attn: Xxxxxx XxXxxx,
Senior Vice President 000 Xxxxxxx
Xxxxxx (Mailzone NY5W) Xxx Xxxx, XX
00000
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Copies of Custodian's confirmations issued pursuant to section
2(f) above should be sent to:
National Financial Services LLC
Attn: Xxxxxx XxXxxx, Senior Vice President
000 Xxxxxxx Xxxxxx (Mail Zone NY5W)
Xxx Xxxx, XX 00000
And
Fidelity Capital Markets
Attn: Xxxx Xxxxx
200 Seaport Blvd, Mail Zone Z2H
Xxxxxx, XX 00000
Or, in the case of any party hereto, such other address and/or telephone number
of which such party may notify the other parties hereto, sent to the other
parties in accordance with this Section 10.
11. GOVERNING LAW; JURISDICTION
(a) This Agreement (including, without limitation, the creation,
validity, perfection and priority of the Security Interest) shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to the conflicts of law principles thereof. In furtherance of the
foregoing, Broker, Customer and Custodian agree that, for all purposes of this
Agreement (including for purposes of Section 9-103(6)(e) of Revised Article 9
and Section 8-110 of Revised Article 8), Custodian is the Securities
Intermediary, and the State of New York shall be deemed to be the Security
Intermediary's jurisdiction.
12. REFERENCES TO TIME OF DAY
All reference herein to times of day shall mean the time in New York
City, New York, U.S.A.
13. OTHER AGREEMENTS
In the event of any inconsistency between this Agreement and any other
written, oral or other agreement, discussion or other communication regarding
the subject matter hereof, the terms of this Agreement shall control; provided,
however, that in the event of any disagreement between the terms of this
Agreement and the Margin Agreement concerning the subject matter of the Margins
Agreement, the terms of the Margin Agreement shall control as between Broker and
Customer. Custodian is not a party to the Margin Agreement and shall not be
bound by the terms
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thereof; Custodian's responsibilities with respect to the subject matter of this
Agreement shall be solely as set forth in this Agreement.
14. COUNTERPARTS
This Agreement may be executed in any number of counterparts and shall
become effective at such time as all such counterparts have been executed by all
of the parties to this Agreement and have been delivered to the other parties
hereto. Each copy of this Agreement that includes counterparts executed by
another party to this Agreement shall constitute an original hereof.
15. CAPTIONS/HEADINGS
The captions and headings preceding the text of each section herein
shall be disregarded in connection with the interpretation of this Agreement.
16. AMENDMENTS
No amendment of this Agreement shall be effective unless executed by
the party against whom enforcement of such amendment is sought.
17. ARBITRATION
It is agreed by all parties that any controversy between the parties,
arising out of or relating to this Agreement or the transactions contemplated
hereby, shall be settled by arbitration, in accordance with the rules then
obtaining of The National Association of Securities Dealers Inc., following a
written demand for arbitration by one party upon the other parties. The award of
the arbitrators shall be final, and judgment upon the award rendered may be
entered in court, state or federal, having jurisdiction.
The parties are aware of the following:
(a) Arbitration is final and binding on the parties.
(b) The parties are waiving their right to seek remedies in
court, including the right to a jury trial.
(c) Pre-arbitration discovery is generally more limited than and
different from court proceedings.
(d) The arbitrators' award is not required to include factual
findings or legal reasoning and any party's right to appeal
or to seek modification of any ruling by the arbitrators
is strictly limited.
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(e) The panel of arbitrators will typically include arbitrators
who were or are affiliated with the securities industry.
No person shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement against
any person who has initiated in court a putative class action or who is a member
of a putative class who has not opted out of the class with respect to any
claims encompassed by the putative class action until:
(i) the class certification is denied;
(ii) the class is decertified; or
(iii) Customer is excluded from the class by the court
Such forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this Agreement except to the extent
stated herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers as of the day and year first above
written.
Hillview Investment Trust II
By:
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Name:
Title:
PFPC Trust Company
By:
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Name:
Title:
National Financial Services LLC
By:
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Name:
Title:
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