Exhibit 7(c)
FORM OF CUSTODIAN AGREEMENT
AGREEMENT dated as of_______________, 2003 between THE NORTHERN TRUST
COMPANY (the "Custodian") and USAA MUTUAL FUND, INC. (the "Customer"), on behalf
of USAA S&P 500 INDEX FUND (the "Series").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereinafter
referred to individually as a "Portfolio" and collectively, as the
"Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN. The Customer hereby employs the Custodian as
custodian of all assets of each Portfolio which are delivered to and accepted by
the Custodian or any Subcustodian (as that term is defined in Section 4)
pursuant to the terms and conditions set forth herein. Without limitation, such
assets shall include stocks and other equity interests of every type, evidences
of indebtedness, other instruments representing same or rights or obligations to
receive, purchase, deliver or sell same and other non-cash investment property
of a Portfolio which is acceptable for deposit ("Securities") and cash from any
source and in any currency ("Cash") (Securities and Cash, collectively,
"Property"). The Custodian shall not be responsible for any property of a
Portfolio held or received by the Customer or others and not delivered to the
Custodian or any Subcustodian.
2. MAINTENANCE OF SECURITIES AND CASH AT CUSTODIAN AND SUBCUSTODIAN
LOCATIONS. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such securities is
located, where such securities are to be presented for payment or where such
securities
are acquired and (b) maintain cash and cash equivalents in such countries in
amounts reasonably necessary to effect the Customer's transactions in such
securities. Instructions to settle securities transactions in any country shall
be deemed to authorize the holding of such Securities and Cash in that country.
3. CUSTODY ACCOUNT. The Custodian agrees to establish and maintain one
or more custody accounts on its books, each in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the account of such Portfolio. Upon
delivery by the Customer to the Custodian of any Property belonging to a
Portfolio, the Customer shall, by Instructions (as hereinafter defined in
Section 14), specifically indicate to which Portfolio such Property belongs, or
if such Property belongs to more than one Portfolio, shall allocate such
Property to the appropriate Portfolios. The Custodian shall allocate such
Property to each Account in accordance with the Instructions; PROVIDED THAT the
Custodian shall have the right, in its sole discretion, to refuse to accept any
Property that is not in proper form for deposit for any reason. The Customer, on
behalf of each Portfolio, acknowledges its responsibility as a principal for all
of its obligations to the Custodian arising under or in connection with this
Agreement, warrants its authority to deposit in the appropriate Account any
Property received therefor by the Custodian or a Subcustodian and to give, and
authorize others to give, instructions relative thereto. The Custodian may
deliver securities of the same class in place of those deposited in an Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions
involving the Property, shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as the same become
payable and credit the same to the appropriate Account;
(b) present for payment all Securities held in an Account which are
called, redeemed or retired or otherwise become payable and all coupons and
other income items which call for payment upon presentation to the extent that
the Custodian or Subcustodian is
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actually aware of such opportunities and hold the cash received in such Account
pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely ministerial
(including, without limitation, the exchange of temporary securities for those
in definitive form and the exchange of warrants, or other documents of
entitlement to securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than ministerial exchanges
described in (i) above) is received for an Account, endeavor to receive
Instructions, provided that if such Instructions are not received in time for
the Custodian to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or stock split is
received for an Account and such rights entitlement or fractional interest bears
an expiration date, if after endeavoring to obtain Instructions such
Instructions are not received in time for the Custodian to take timely action or
if actual notice of such actions was received too late to seek Instructions,
sell in the discretion of the Custodian (which sale the Customer hereby
authorizes the Custodian to make) such rights entitlement or fractional interest
and credit the appropriate Account with the net proceeds of such sale;
(e) execute in the Customer's name for an Account, whenever the
Custodian deems it appropriate, such ownership and other certificates as may be
required to obtain the payment of income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the nature of
taxes imposed on interest, dividends or other similar income on the Property in
such Account by any governmental authority. In the event there is insufficient
Cash available in an Account to pay such taxes and levies, the Custodian shall
notify the Customer of the amount of the shortfall and the Customer, at its
option, may deposit additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if requested by the
Custodian and required in connection with the payment of any such taxes to
cooperate with the Custodian in furnishing information, executing documents or
otherwise; and
(g) appoint brokers and agents for any of the ministerial transactions
involving the Securities described in (a) - (f), including, without limitation,
affiliates of the Custodian or any Subcustodian.
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4. SUBCUSTODIANS AND SECURITIES SYSTEMS. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody accounts
which have been established by the Custodian with (a) one of its U.S. branches
or another U.S. bank or trust company or branch thereof located in the U.S.
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a
U.S. securities depository or clearing agency or system in which the Custodian
or a U.S. Subcustodian participates (individually, a "U.S. Securities System")
or (b) one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
"U.S. Securities System" and "non-U.S. Securities System", collectively,
"Securities System"), PROVIDED that in each case in which a U.S. Subcustodian or
U.S. Securities System is employed, each such Subcustodian or Securities System
shall have been approved by Instructions; PROVIDED FURTHER that in each case in
which a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a)
such Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any Subcustodian or
Securities System has been proper under the 1940 Act or any rule or regulation
thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each
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non-U.S. Subcustodian and non-U.S. Securities System then acting on behalf of
the Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Directors to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities Systems as may reasonably be requested by
the Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5
requires the Customer's Board of Directors to directly approve its foreign
custody arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. The Custodian agrees to
promptly notify the Customer if, in the normal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. USE OF SUBCUSTODIAN. With respect to Property in an Account which is
maintained by the Custodian in the custody of a Subcustodian employed pursuant
to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such Subcustodian.
(b) Any Property in an Account held by a Subcustodian will be subject
only to the instructions of the Custodian or its agents unless otherwise agreed
between Customer and Custodian.
(c) Property deposited with a Subcustodian will be maintained in an
account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall require that (i) the
Account will be adequately indemnified or its losses adequately insured; (ii)
the Securities are not subject to any right, charge, security interest, lien or
claim of any kind in favor of such Subcustodian or its creditors except a claim
for payment in accordance with such agreement for their safe custody or
administration and expenses related thereto, (iii) beneficial ownership of such
Securities be freely transferable without the
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payment of money or value other than for safe custody or administration and
expenses related thereto, (iv) adequate records will be maintained identifying
the Property held pursuant to such Agreement as belonging to the Custodian, on
behalf of its customers and (v) to the extent permitted by applicable law,
officers of or auditors employed by, or other representatives of or designated
by, the Custodian, including the independent public accountants of or designated
by, the Customer be given access to the books and records of such Subcustodian
relating to its actions under its agreement pertaining to any Property held by
it thereunder or confirmation of or pertinent information contained in such
books and records be furnished to such persons designated by the Custodian.
6. USE OF SECURITIES SYSTEM. With respect to Property in the Account(s)
which are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by its
agreement with the Custodian to, identify on its books such Property as being
held for the account of the Custodian or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of the
Custodian or a Subcustodian will be subject only to the instructions of the
Custodian or such Subcustodian, as the case may be.
(c) Property deposited with a Securities System will be maintained in
an account holding only assets for customers of the Custodian or Subcustodian,
as the case may be, unless precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report obtained
by the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities System.
7. AGENTS. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; PROVIDED, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
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8. RECORDS, OWNERSHIP OF PROPERTY, STATEMENTS, OPINIONS OF INDEPENDENT
CERTIFIED PUBLIC Accountants.
(a) The ownership of the Property whether Securities, Cash and/or other
property, and whether held by the Custodian or a Subcustodian or in a Securities
System as authorized herein, shall be clearly recorded on the Custodian's books
as belonging to the appropriate Account and not for the Custodian's own
interest. The Custodian shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions for each Account.
All accounts, books and records of the Custodian relating thereto shall be open
to inspection and audit at all reasonable times during normal business hours by
any person designated by the Customer. All such accounts shall be maintained and
preserved in the form reasonably requested by the Customer. The Custodian will
supply to the Customer from time to time, as mutually agreed upon, a statement
in respect to any Property in an Account held by the Custodian or by a
Subcustodian. In the absence of the filing in writing with the Custodian by the
Customer of exceptions or objections to any such statement within sixty (60)
days of the mailing thereof, the Customer shall be deemed to have approved such
statement and in such case or upon written approval of the Customer of any such
statement, such statement shall be presumed to be for all purposes correct with
respect to all information set forth therein.
(b) The Custodian shall take all reasonable action as the Customer may
request to obtain from year to year favorable opinions from the Customer's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Customer's Form
N-1A and the Customer's Form N-SAR or other periodic reports to the SEC and with
respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to the
Customer a written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding Cash and
Securities, including Cash and Securities deposited and/or maintained in a
securities system or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably be required by the Customer and
as may reasonably be obtained by the Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by
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the Custodian which can provide the Customer, on a daily basis, with the ability
to view on-line or to print on hard copy various reports of Account activity and
of Securities and/or Cash being held in any Account. To the extent that such
service shall include market values of Securities in an Account, the Customer
hereby acknowledges that the Custodian now obtains and may in the future obtain
information on such values from outside sources that the Custodian considers to
be reliable and the Customer agrees that the Custodian (i) does not verify nor
represent or warrant either the reliability of such service nor the accuracy or
completeness of any such information furnished or obtained by or through such
service and (ii) shall be without liability in selecting and utilizing such
service or furnishing any information derived therefrom.
9. HOLDING OF SECURITIES, NOMINEES, ETC. Securities in an Account which
are held by the Custodian or any Subcustodian may be held by such entity in the
name of the Customer, on behalf of the appropriate Portfolio, in the Custodian's
or Subcustodian's name, in the name of the Custodian's, Subcustodian's or
Securities System's nominee, or in bearer form. Securities that are held by a
Subcustodian or which are eligible for deposit in a Securities System as
provided above may be maintained with the Subcustodian or the Securities System
in an account for the Custodian's or Subcustodian's customers, unless prohibited
by law, rule, or regulation. The Custodian or Subcustodian, as the case may be,
may combine certificates representing Securities held in an Account with
certificates of the same issue held by it as fiduciary or as a custodian. In the
event that any Securities in the name of the Custodian or its nominee or held by
a Subcustodian and registered in the name of such Subcustodian or its nominee
are called for partial redemption by the issuer of such Security, the Custodian
may, subject to the rules or regulations pertaining to allocation of any
Securities System in which such Securities have been deposited, allot, or cause
to be allotted, the called portion of the respective beneficial holders of such
class of security in any manner the Custodian deems to be fair and equitable.
10. PROXIES, ETC. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian
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and the Customer may agree upon as provided in (iii) of the immediately
preceding sentence shall be as set forth in the description of the Proxy Service
and as may be agreed upon by the Custodian and the Customer in connection with
the furnishing of any such additional service and shall not be affected by any
other term of this Agreement. Neither the Custodian nor its nominees or agents
shall vote upon or in respect of any of the Securities in an Account, execute
any form of proxy to vote thereon, or give any consent or take any action
(except as provided in Section 3) with respect thereto except upon the receipt
of Instructions relative thereto.
11. SEGREGATED ACCOUNT. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. SETTLEMENT PROCEDURES.
(a) The proceeds from the sale or exchange of Securities will be
credited and the cost of such Securities purchased or acquired will be debited
to the Account in accordance with the schedule specified in the Custodian's
operating guidelines in effect from time to time. Upon the execution and
delivery of this Agreement, the Customer acknowledges receipt of the Custodian's
operating guidelines in effect on the date hereof. Notwithstanding the preceding
sentence, settlement and payment for Securities received for an Account and
delivery of Securities maintained for an Account may be effected in accordance
with the customary or 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. The Custodian shall not be liable for
any loss which results from effecting transactions in accordance with the
customary or established securities trading or securities processing practices
and procedures in the applicable jurisdiction or market.
(b) The Custodian shall not be required to comply with any Instructions
to settle the purchase of any securities for an Account, unless there are
sufficient immediately available funds in the Account, PROVIDED THAT, if, after
all expenses, debits and withdrawals ("Debits") applicable to the Account have
been made and if after all Conditional Credits, as defined below, applicable to
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the Account have been made final entries as set forth in (d) below, the amount
of immediately available funds in such Account is at least equal to the
aggregate purchase price of all securities for which the Custodian has received
Instructions to settle on that date ("Settlement Date"), the Custodian, upon
settlement, shall credit the Securities to an Account by making a final entry on
its books and records.
(c) Notwithstanding the foregoing, if, after all Debits applicable to
the Account have been made, there remains outstanding any Conditional Credit
applicable to the Account or the amount of immediately available funds in such
Account is less than the aggregate purchase price of all securities for which
the Custodian has received Instructions to settle on the Settlement Date, the
Custodian, upon settlement, may credit the securities to the applicable Account
by making a conditional entry on its books and records ("Conditional Credit"),
pending receipt of sufficient immediately available funds in the Account.
(d) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have been made,
immediately available funds at least equal to the aggregate purchase price of
all securities subject to a Conditional Credit on a Settlement Date are
deposited into the Account, the Custodian shall make the Conditional Credit a
final entry on its books and records. In such case, the Customer shall be liable
to the Custodian only for late charges at a rate mutually agreed upon in writing
by the Custodian and the Customer.
(e) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have been made,
immediately available funds at least equal to the aggregate purchase price of
all securities subject to a Conditional Credit on a Settlement Date are not
deposited into the Account, the Customer, authorizes the Custodian, as agent, to
sell the securities and credit the applicable Account with the proceeds of such
sale. In such case, the Customer shall be liable to the Custodian for any
deficiencies, out-of-pocket costs and expenses associated with the sale of the
securities, including but not limited to, shortfalls in the sales proceeds.
(f) The Customer agrees that it will not use the Account to facilitate
the purchase of securities without sufficient funds in the Account (which funds
shall not include the proceeds of the sale of the purchased securities).
13. PERMITTED TRANSACTIONS. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon
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Instructions in accordance Section 14 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or the Customer's transfer agent.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Custodian, a Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among the Customer, on behalf of a Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation, the Commodities Futures Trading
Commission and of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
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(l) For release of Securities to designated brokers under covered call
options, PROVIDED, HOWEVER, that such Securities shall be released only upon
payment to the Custodian of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Custodian will receive the Securities previously deposited from
the broker. The Custodian will act strictly in accordance with Instructions in
the delivery of Securities to be held in escrow and will have no responsibility
or liability for any such Securities which are not returned promptly when due
other than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related transactions.
(n) Upon the termination of this Agreement as set forth in Section 20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected and shall have no
liability, subject to the provisions of Section 14, for following an Instruction
in connection with a transaction not provided for above.
14. INSTRUCTIONS. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 21 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular class
of Instructions in question and whose name and (if applicable) signature and
office address have been filed with the Custodian, or (ii) which have been
transmitted electronically through an electronic on-line service and
communications system offered by the Custodian or other electronic instruction
system acceptable to the Custodian, subject to such additional terms and
conditions the Custodian may reasonably require or (iii) a telephonic or oral
communication by one or more persons as the Customer shall have from time to
time authorized to give the particular class of Instructions in question and
whose name has been filed with the Custodian; or (iv) upon receipt of such other
form of instructions as the Customer may from time to time authorize in writing
and which the Custodian has agreed in writing to accept. Instructions in the
form of oral communications shall
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be confirmed by the Customer by tested telex or writing in the manner set forth
in clause (i) above, but the lack of such confirmation shall in no way affect
any action taken by the Custodian in reliance upon such oral instructions prior
to the Custodian's receipt of such confirmation. Instructions may relate to
specific transactions or to types or classes of transactions, and may be in the
form of standing instructions.
The Custodian shall have the right to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
15. STANDARD OF CARE. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not the contrary to the provisions
of this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself, PROVIDED THAT if Customer by
Instructions selects any U.S. Subcustodian or a non-U.S. Subcustodian which, at
the time of selection is no part of the Custodian's existing global custody
network, the Custodian shall be only liable for its own negligence. With respect
to a Securities System, the Custodian shall only be responsible or liable for
losses arising from employment of such Securities System caused by the
Custodian's own failure to exercise
-13-
reasonable care. In the event of any loss to the Customer by reason of the
failure of the Custodian or a Subcustodian to utilize reasonable care, the
Custodian shall be liable to the Customer to the extent of the Customer's actual
damages at the time such loss was discovered without reference to any special
conditions or circumstances. In no event shall the Custodian be liable for any
consequential or special damages. The Custodian shall be entitled to rely, and
may act, on advice of counsel (who may be counsel for the Customer) on all
matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
-14-
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
The provisions of this Section shall survive termination of this
Agreement.
16. INVESTMENT LIMITATIONS AND LEGAL OR CONTRACTUAL RESTRICTIONS OR
REGULATIONS. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
17. FEES AND EXPENSES. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the performance of this
Agreement, including (but without limitation) legal fees as described herein
and/or deemed necessary in the judgment of the Custodian to keep safe or protect
the Property in an Account. The Customer hereby agrees to hold the Custodian
harmless from any liability or loss resulting from any taxes or other
governmental charges, and any expense related thereto, which may be imposed, or
assessed with respect to any Property in an Account and also agrees to hold the
Custodian, its Subcustodians, and their respective nominees harmless from any
liability as a record holder of Property in such Account. The Custodian is
authorized to charge the applicable Account for such items and the Custodian
shall have a lien on the Property in the applicable Account for any amount
payable to the Custodian under this Agreement, including, but not limited to,
amounts payable pursuant to paragraph (e) of Section 12 and pursuant to
indemnities granted by the Customer under this Agreement. The provisions of this
Section shall survive the termination of this Agreement.
18. TAX RECLAIMS. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit C, attached hereto, and shall in connection therewith be subject to the
-15-
standard of care set forth in such Exhibit C. Such standard of care shall not be
affected by any other term of this Agreement.
19. AMENDMENT, MODIFICATIONS, ETC. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
20. TERMINATION.
(a) TERMINATION OF ENTIRE AGREEMENT. This Agreement may be terminated
by the Customer at any time by written notice or by the Custodian by the giving
of one hundred twenty (120) days written notice to the Customer; PROVIDED that
such written notice by the Customer shall specify the names of the persons to
whom the Custodian shall deliver the Securities in each Account and to whom the
Cash in each Account shall be paid. If notice of termination is given by the
Custodian, the Customer shall, within one hundred twenty (120) days following
the giving of such notice, deliver to the Custodian a written notice specifying
the names of the persons to whom the Custodian shall deliver the Securities in
each Account and to whom the Cash in each Account shall be paid. In either case,
the Custodian will deliver such Securities and Cash to the persons so specified,
after deducting therefrom any amounts which the Custodian determines to be owed
to it under Sections 12, 17, and 23. In addition, the Custodian may in its
discretion withhold from such delivery such Cash and Securities as may be
necessary to settle transactions pending at the time of such delivery. The
Customer grants to the Custodian a lien and right of setoff against the Account
and all Property held therein from time to time in the full amount of the
foregoing obligations. If within one hundred twenty (120) days following the
giving of a notice of termination by the Custodian, the Custodian does not
receive from the Customer a written notice specifying the names of the persons
to whom the Custodian shall deliver the Securities in each Account and to whom
the Cash in such Account shall be paid, the Custodian, at its election, may
deliver such Securities and pay such Cash to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions of this Agreement, or may continue to hold such Securities and Cash
until a written notice as aforesaid is delivered to the Custodian, provided that
the Custodian's obligations shall be limited to safekeeping.
-16-
(b) TERMINATION AS TO ONE OR MORE PORTFOLIOS. This Agreement may be
terminated by the Customer as to one or more Portfolio(s) (but less than all of
the Portfolios) at any time by delivery of an amended Exhibit A deleting such
Portfolio(s). This Agreement may be terminated by the Custodian as to one or
more Portfolio(s) (but less than all of the Portfolios) by delivery of an
amended Exhibit A deleting such Portfolio(s), in which case termination as to
such deleted Portfolio(s) shall take effect one hundred twenty (120) days after
the date of such delivery, or such earlier time as mutually agreed. The
execution and delivery of an amended Exhibit A which deletes one or more
Portfolio(s) shall constitute a termination of this Agreement only with respect
to such deleted Portfolio(s), shall be governed by the preceding provisions of
Section 20 as to the identification of a successor custodian and the delivery of
Cash and Securities of the Portfolio(s) so deleted to such successor custodian,
and shall not affect the obligations of the Custodian and the Customer hereunder
with respect to the other Portfolio(s) set forth in Exhibit A, as amended from
time to time.
21. NOTICES. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by telex,
telegram, cable, facsimile or other means of electronic communication agreed
upon by the parties hereto addressed:
if to the Customer, to:
Xxxxxxx Xxxxxxx
0000 Xxxxxxxxxxxxxx Xxxx, XX0X
Xxx Xxxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Facsimile: (210) ____________
if to the Custodian, to:
Xxxxx Xxxxxxx
The Northern Trust Company
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
or in either case to such other address as shall have been furnished to the
receiving party pursuant to the provisions hereof and (b) shall be deemed
effective when received, or, in the case of
-17-
a telex, when sent to the proper number and acknowledged by a proper answerback.
22. SEVERAL OBLIGATIONS OF THE PORTFOLIOS. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and Property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
23. SECURITY FOR PAYMENT. To secure payment of all obligations due
hereunder, the Customer hereby grants to the Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations; PROVIDED THAT,
if there is more than one Account and the obligations secured pursuant to this
Section can be allocated to a specific Account or the Portfolio related to such
Account, such security interest and right of setoff will be limited to Property
held for that Account only and its related Portfolio. Should the Customer fail
to pay promptly any amounts owed hereunder, the Custodian shall be entitled to
use available Cash in the Account or applicable Accounts, as the case may be,
and to dispose of Securities in the Account or such applicable Account as is
necessary. In any such case and without limiting the foregoing, the Custodian
shall be entitled to take such other action(s) or exercise such other options,
powers and rights as the Custodian now or hereafter has as a secured creditor
under the New York Uniform Commercial Code or any other applicable law.
24. REPRESENTATIONS AND WARRANTIES.
(a) The Customer hereby represents and warrants to the Custodian that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is
not prohibited by law or any governing documents or contracts to which
the Customer is subject;
(ii) the terms of this Agreement do not violate any obligation
by which the Customer is bound, whether arising by contract, operation
of law or otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be
-18-
binding upon the Customer and each Portfolio in accordance with its
terms; and
(iv) the Customer will deliver to the Custodian such evidence
of such authorization as the Custodian may reasonably require, whether
by way of a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) the terms of this Agreement do not violate any obligation
by which the Custodian is bound, whether arising by contract, operation
of law or otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the
Custodian in accordance with its terms;
(iii) the Custodian will deliver to the Customer such evidence
of such authorization as the Customer may reasonably require, whether
by way of a certified resolution or otherwise; and
(iv) the Custodian is qualified as a custodian under Section
26(a) of the 1940 Act and warrants that it will remain so qualified or
upon ceasing to be so qualified shall promptly notify the Customer in
writing.
25. GOVERNING LAW AND SUCCESSORS AND ASSIGNS. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
26. PUBLICITY. Customer shall furnish to Custodian at its office
referred to in Section 21 above, (a) at least ten (10) days prior to filing or
first use, as the case may be, drafts of its registration statement on Form N-1A
(including amendments) and prospectus supplements or amendments relating to the
Customer, or (b) at least two (2) business day prior to filing or first use, as
the case may be, as proposed advertising or sales literature relating to the
Custodian. The Customer will not make any other written or oral representation
about the Custodian without its prior written consent. The provisions of this
Section shall survive the termination of this Agreement.
27. SUBMISSION TO JURISDICTION. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of Xxx Xxxx, Xxxxx xx
-00-
Xxx Xxxx, Xxxxxx Xxxxxx of America, and the Customer irrevocably submits to the
non-exclusive jurisdiction of any such court in any such suit, action or
proceeding and waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of venue of any such suit,
action or proceeding brought in such a court and any claim that such suit,
action or proceeding was brought in an inconvenient forum.
28. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
29. CONFIDENTIALITY. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation.
30. SEVERABILITY. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
31. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter herein and supersedes all
prior agreements and understandings relating to such subject matter.
Notwithstanding the foregoing, nothing in this Agreement shall affect any other
agreement between the parties related to other subject matters.
-20-
32. HEADINGS. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
USAA MUTUAL FUND, INC.
By:
Title:
THE NORTHERN TRUST COMPANY
By:
Title:
-21-
EXHIBIT A
To Custodian Agreement dated as of________, 2003 between The Northern
Trust Company and USAA Mutual Fund, Inc.
LIST OF PORTFOLIOS
The following is a list of Portfolio(s) referred to in the first
WHEREAS clause of the above-referred to Custodian Agreement. Terms used herein
as defined terms, unless otherwise defined, shall have the meanings ascribed to
them in the above-referred to Custodian Agreement.
USAA S&P 500 Index Fund
Dated as of: ______, 2003 USAA MUTUAL FUND, INC.
By:
Title:
THE NORTHERN TRUST COMPANY
By:
Title:
EXHIBIT B
To Custodian Agreement dated as of __________, 2003 between The
Northern Trust Company and USAA Mutual Fund, Inc.
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein, unless otherwise
defined below.
The Custodian currently provides proxy voting services, including event
notification, voting for annual general meetings and extraordinary meetings, in
partnership with the following market specialists:
Institutional Shareholder Services (ISS), for all global proxy services
ex-U.S. ADP, for U.S. proxy services
Proxy voting services are currently provided in the markets listed
below:
Argentina Malaysia
Australia Mexico
Austria Netherlands
Belgium New Zealand
Canada Norway
China Philippines
Czech Republic Poland
Denmark Portugal
Euroclear Singapore
Finland Slovak Republic
France South Africa
Germany South Korea
Greece Spain
Hong Kong Sri Lanka
Hungary Sweden
Indonesia Switzerland
Ireland Thailand
Italy United Kingdom
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Japan United States
Kenya Venezuela
For those markets not covered by our standard proxy voting service, the
Fund Manager can contact Custodian directly with voting instructions on specific
events; Custodian will use reasonable efforts to vote these proxies for the
customer.
All proxy voting instructions must be received by Custodian before
specified deadline for execution. Execution costs attributable to settlement and
custody activities in specific markets, such as stamp duty, securities
re-registration fees, and will be passed through where applicable.
Custodian may at its sole discretion change its arrangement for
provision of proxy service from time to time, provided such change is
communicated promptly to the Customer in writing.
Dated as of: _____, 2003 USAA MUTUAL FUND, INC.
By:
Title:
THE NORTHERN TRUST COMPANY
By:
Title:
-24-
EXHIBIT C
To Custodian Agreement dated as of ________, 2003 between The Northern
Trust Company and USAA Mutual Fund, Inc.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in any Account.
Terms used herein as defined terms shall, unless otherwise defined, have the
meanings ascribed to them in the above referred to Custodian Agreement.
When withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue, on a reasonable
efforts basis, the reclaim process, PROVIDED THAT the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall
be entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Custodian of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian, counsel or other professional tax advisers and
shall be without liability to the Customer for any action reasonably taken or
omitted pursuant to information contained in such services or such advice.
Dated as of: ______, 2003 USAA MUTUAL FUND, INC.
By:
Title:
THE NORTHERN TRUST COMPANY
By:
Title:
-2-
Exhibit 7(d)
USAA MUTUAL FUND, INC.
FORM OF SUBCUSTODIAN AGREEMENT
WITH
JPMORGAN CHASE
The undersigned custodian (the "Custodian") for USAA Mutual Fund, Inc.
(the "Company"), an open-end investment company registered under the Investment
Company Act of 1940 (the "1940 Act"), hereby appoints JPMorgan Chase as
subcustodian (the "Subcustodian") for one of the series of the Company, the USAA
S&P 500 Index Fund (the "Fund") and the Subcustodian hereby accepts such
appointment on the following terms and conditions as of the date set forth
below.
1. QUALIFICATION. The Custodian and the Subcustodian each represents to
the other and to the Company that it is qualified to act as a custodian for a
registered investment company under the 1940 Act, and the Custodian represents
to the Subcustodian that it is the duly appointed, qualified and acting
Custodian of the Fund, with all necessary power and authority to enter into this
Agreement.
2. SUBCUSTODY. The Subcustodian agrees to maintain one or more
custodial accounts ("Subscription Accounts") for the Fund in which checks
("Subscription Checks") issued in payment for purchases of Fund shares shall be
deposited by USAA Transfer Agency Company d/b/a USAA Shareholder Account
Services ("Transfer Agent"), transfer agent of the Fund (the "Transfer Agent").
The Subcustodian further agrees to debit IMCO account no. 06407080765 (the
"Return Item Account") for the aggregate amount of all Subscription Checks
returned to the Subcustodian for non-payment ("Return Items"), informing
Transfer Agent daily of any returned Subscription Checks. In the event that the
available funds in the Return Item Account are insufficient to cover the amount
of the Return Items, Subcustodian will promptly notify Transfer Agent by
telephone of the amount of such insufficiency. Upon receipt of such telephone
notice, Transfer Agent agrees to remit to Subcustodian the full amount of any
such insufficiency.
Each business day the Subcustodian agrees to, based upon
instructions by Transfer Agent, remit to the Custodian by wire (in immediately
available funds) transfer amounts of Subscription Checks deposited in the
Subscription Account on the preceding business day notwithstanding whether the
Subcustodian has collected good funds in respect of such checks. The Fund will
compensate the Subcustodian for (i) estimated earnings lost on amounts wired to
the Custodian in payment of Subscription Checks during the period from the date
wire payment is made through the date good funds on such checks are received by
the Subcustodian, (ii) for service fees charged by the Subcustodian for
processing Subscription Checks as set forth in Schedule 1 to this Agreement
(these amounts will be paid monthly and computed based on an overall account
relationship), (iii) other miscellaneous fees as described in Schedule 1, and
(iv) Return Items not paid by the Transfer Agent or USAA Investment Management
Company ("IMCO") within five (5) business days following a request for payment
by Subcustodian pursuant to this paragraph.
3. INSTRUCTIONS: OTHER COMMUNICATIONS. Any one officer or other
authorized representative of the Transfer Agent designated as hereinafter
provided as an officer or other authorized representative of the Transfer Agent
authorized to give instructions to the Subcustodian with respect to Fund assets
held in Subscription Accounts (an "Authorized Officer"), shall be authorized to
instruct the Subcustodian as to the deposit, withdrawal or any other action with
respect to Fund assets from time to time by telephone, or in writing signed by
such Authorized Officer and delivered by telecopy, tested telex, tested computer
printout or such other reasonable method as the Transfer Agent and Subcustodian
shall agree; provided, however, the Subcustodian is authorized to accept and act
upon instructions from the Transfer Agent, whether orally, by telephone or
otherwise, which the Subcustodian reasonably believes to be given by an
authorized person. The Subcustodian may require that any instructions given
orally or by telecommunications be promptly confirmed in writing.
The Authorized Officers shall be as set forth on Schedule 2
attached hereto or as otherwise from time to time certified in writing by the
Transfer Agent to the Subcustodian signed by the President or any Vice President
and any Assistant Vice President, Assistant Secretary or Assistant Treasurer of
the Company. In addition to a written list of authorized officers, the Transfer
Agent will provide Subcustodian with additional information and signature cards
as reasonably requested by Subcustodian relating to the authorized officers. The
Subcustodian shall furnish the Transfer Agent, with a copy to the Fund, by first
class mail, or other mutually agreed-upon means of transmission, (i) prompt
telephonic and written notice of Return Items, (ii) a monthly report on activity
in each of the Subscription Accounts within five (5) days after the end of each
calendar month, and (iii) a daily statement of activity in each of the
Subscription Accounts. The Subcustodian shall also furnish the Custodian with a
copy of item (ii) above.
4. FEES. The service fees charged by the Subcustodian under the
Agreement are set forth in Schedule 1 attached hereto. Schedule 1 may be amended
by the parties in writing provided written notice is furnished to the Fund
thirty (30) days in advance of any increase in fees.
5. LIABILITIES.
(i) The Subcustodian and Custodian shall be held harmless by the
Transfer Agent and shall not be liable for any action taken or omitted to be
taken under this Agreement, except for actions or omissions caused by the
Subcustodian's or Custodian's negligence, willful malfeasance, or bad faith in
connection with its obligations and duties under this Agreement. Except as
otherwise set forth herein, neither the Custodian nor the Subcustodian shall
have responsibility with respect to Fund assets. The Subcustodian and Custodian
shall, for the benefit of the Custodian or Subcustodian, as the case may be, and
the Fund, use the same care with respect to handling of Fund assets in
depository accounts as it uses in respect of its own assets similarly held.
Neither the Custodian nor the Subcustodian shall have responsibility with
respect to any monies or any wire transfer, checks or other instruments for the
payment of money unless and until actually received or secured by wire transfer
by the Custodian or Subcustodian, as the case may be. IN NO EVENT
2
WILL THE SUBCUSTODIAN OR CUSTODIAN BE LIABLE TO THE CUSTODIAN OR SUBCUSTODIAN,
AS THE CASE MAY BE, TRANSFER AGENT OR THE FUND FOR ANY INDIRECT DAMAGES, LOST
PROFITS, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES WHICH ARISE OUT OF OR IN
CONNECTION WITH THE SERVICES CONTEMPLATED HEREIN.
(ii) The Subcustodian shall indemnify, defend and save harmless the
Custodian and the Fund from and against all loss, liability, claims and demands
incurred by the Custodian or the Fund arising out of or in connection with the
Subcustodian's negligence, willful malfeasance or bad faith in connection with
its obligations and duties under this Agreement.
(iii) The Custodian shall indemnify, defend and save harmless the
Subcustodian and the Fund from and against all loss, liability, claims and
demands incurred by the Subcustodian or the Fund arising out of or in connection
with the Custodian's negligence, willful malfeasance or bad faith in connection
with its obligations and duties under this Agreement.
(iv) The Transfer Agent shall indemnify, defend and save harmless the
Subcustodian from and against all loss, liability, claims and demands incurred
by the Subcustodian arising out of or in connection with the Transfer Agent's
negligence, willful malfeasance or bad faith in connection with its obligations
and duties under this Agreement.
(v) The Subcustodian shall indemnify, defend and save harmless the
Transfer Agent from and against all loss, liability, claims and demands incurred
by the Transfer Agent arising out of or in connection with the Subcustodian's
negligence, willful malfeasance or bad faith in connection with its obligations
and duties under this Agreement.
(vi) It is understood and expressly stipulated that neither the
shareholders of the Fund nor the members of the Board of the Company shall be
personally liable hereunder. The obligations of the Fund hereunder are not
personally binding upon, nor shall resort to the private property of, any of the
members of the Board of the Company, nor of its shareholders, officers,
employees or agents, but only the Fund's property shall be bound.
6. TERMINATION. The Transfer Agent may terminate this Agreement at any
time upon notice to the Subcustodian and Custodian. The Custodian and
Subcustodian each may terminate this Agreement at any time by not less than
thirty (30) days' prior written notice which shall specify the date of such
termination; and further, provided, however, that the Custodian may immediately
terminate this Agreement in the event of the appointment of a conservator or
receiver for the Subcustodian by the Federal Deposit Insurance Corporation or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction. Upon termination, the Subcustodian
shall make immediate delivery of all Fund assets held in the Subscription
Accounts to the Custodian or to any third party specified by the Custodian in
writing. If
3
any Subscription Checks are subsequently returned unpaid the Fund shall direct
the Transfer Agent to pay the Subcustodian the amount thereof on behalf of the
Fund promptly upon demand.
7. COMMUNICATIONS. All notices to be delivered pursuant to the terms of
this Agreement shall be given in writing, and shall be deemed given (a) upon
delivery in person to the persons indicated below, or (b) three days after
deposit in the United States Postal Service, postage prepaid, registered, or
certified mail, return receipt requested, or (c) upon receipt by facsimile
(provided that such receipt of such facsimile is confirmed telephonically by the
addressee), or (d) by overnight delivery service (with receipt of delivery),
sent to the addresses shown below, or to such different address(es) as such
party shall be designated by written notice to the other parties hereto at least
ten (10) days in advance of the date upon which such change of address shall be
effective. All communications required or permitted to be given under this
Agreement, unless otherwise agreed by the parties, shall be addressed as
follows:
(i) to the Subcustodian:
JPMorgan Chase
[Address]
Attn: [Contact]
(ii) to the Custodian:
The Northern Trust Company
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
(iii) to the Transfer Agent: USAA Shareholder Account Services
0000 Xxxxxxxxxxxxxx Xxxx, XX0X
(As instructed by the Custodian) Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxx
8. ACCESS TO RECORDS. The Subcustodian will not refuse any reasonable
request for inspection and audit of its books and records concerning
transactions and balances of the Subscription Accounts by an agent of the Fund
or the Custodian.
9. COOPERATION. The Subcustodian shall cooperate with the Fund and the
Custodian and their respective independent public accountants in connection with
annual and other audits of the books and records of the Custodian or the Fund.
10. MISCELLANEOUS. This Agreement (i) shall be governed by and
construed in accordance with the laws of the state of Texas without regard to
conflicts or choice of law rules, except as
4
it imposes duties involving Custodian, in such case the laws of the state of New
York apply, (ii) may be executed in counterparts each of which shall be deemed
an original but all of which shall constitute the same instrument, and (iii) may
only be amended by the parties hereto in writing.
11. TERMS AND CONDITIONS OF DEPOSIT ACCOUNTS. The handling of the
Subscription Accounts and the Return Item Account and all other accounts
maintained with Subcustodian in connection with or relating to this Agreement
will be subject to the Subcustodian's Terms and Conditions of Deposit Accounts,
and any and all rules or regulations now or hereafter promulgated by the
Subcustodian which relate to such accounts and the Uniform Commercial Code, as
adopted by the State of Texas (except in the event any of the same are contrary
to the specific provisions hereof). In the event of any specific conflict
between the provisions hereof and the provisions of any of the agreements, rules
and regulations referenced in this paragraph, the provisions of this Agreement
shall control.
12. SIGNATURE AUTHORITY. Each of the undersigned represents and
warrants that he/she has the requisite authority to execute this Agreement on
behalf of the party for whom the undersigned signs; that all necessary action
has been taken to authorize this Agreement; that this Agreement, upon execution
and delivery, shall be a binding obligation of such party.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth below.
Dated: ____________, 2003
THE NORTHERN TRUST COMPANY
As Custodian
By: _____________________________
Title: _____________________________
JPMORGAN CHASE
As Subcustodian
By: ____________________________
Title: ____________________________
5
USAA TRANSFER AGENCY COMPANY
As Transfer Agent
By: ______________________________
Xxxxx X. Xxxxxxxxx
Title: Senior Vice President
The Company, on behalf of the Fund, hereby consents and agrees to the
terms of the foregoing Subcustodian Agreement; provided, however, that the same
shall not relieve the Custodian of any of its responsibilities to the Fund as
set forth in the Custodian Agreement between the Company and the Custodian.
USAA MUTUAL FUND, INC.
on behalf of itself and its series
USAA S&P 500 INDEX FUND
By: ________________________________
Xxxxxxxxxxx X. Xxxxx
Title: President
IMCO hereby consents and agrees to the terms of the foregoing
Subcustodian Agreement.
USAA INVESTMENT MANAGEMENT COMPANY
By:_______________________________
Xxxxxxxxxxx X. Xxxxx
Title: President
6
SCHEDULE 1
FEES
ITEM PROCESSING PRICING
HIGH VOLUME CORPORATE ACCOUNTS
SERVICE PRICE
PRE-ENCODED DEPOSIT
On-Us $ .019/item
Tier I/Local City $ .019/item
Tier II/Local RCPC $ .029/item
Tier III/Texas Fed Cities $ .040/item
Tier IV/Other Texas $ .050/item
Tier V/Other Transit $ .059/item
Rejects $ .03/item
Account Maintenance $ 10.00/account
Debits Posted $ .12/item
Credits Posted $ .45/deposit
FDIC Assessment $ .16/$1,000 ledger bal./mo.
7
MICROLINK PRICING
SERVICE PRICE
CASH MANAGER
SOFTWARE PRICING *
Cash Manager Setup Fee $ 325.00
MAINTENANCE *
Cash Manager $ 35.00/customer/month
BANK ACCOUNT REPORTING
TCB
(First 5 Accounts) $ 25.00/account/month
Current Day Reporting **
TRANSACTION REPORTING
Previous Day Items $ .15/item
Current Day Items $ .20/item
AUTOMATED PAYMENTS & COLLECTIONS (APC)***
SOFTWARE PRICING *
APC Setup Fee $ 225.00
MAINTENANCE *
Automated Payments & Collections $ 25.00/customer/month
APC TRANSACTIONS
First 1-500 Transactions $ .30/transaction
* Fees are for single micro-computer software. Additional micro-computer
software and maintenance charges are available at 50% off listed fees.
** The charge for Current Day Reporting is in addition to the account charges.
*** Refer to ACH Price Sheet for additional APC and DTS charges.
TEXSTAR FUNDS TRANSFER PRICING
8
SERVICE PRICE
TexStar Account Maintenance $ 0.00/account/month
INCOMING TRANSFER
Autopost Domestic $ 4.50/transfer
NOTIFICATIONS
TexStar Direct Access $ No charge
TEXSTAR DIRECT ACCESS, TEXSTAR EXPRESS,
AUTOMATIC STANDING TRANSFER, BATCHWIRE*
Internal $ 1.00/transfer
Outgoing
Repetitive $ 6.00/transfer
* BatchWire supports domestic internal and outgoing repetitive funds transfers.
9
AUTOMATED CLEARING HOUSE (ACH)
ORIGINATION
(STATEWIDE)
SERVICE PRICE
MICROLINK (APC MODULE)
Software Setup Fee $ 225.00
Maintenance $ 25.00/customer/month
INITIATION
First 1-500 transactions $ .30/transaction
Monthly Maintenance * $ 50.00/customer Tax ID/
month
* One charge for all accounts
10
INTERNATIONAL COLLECTION SERVICES PRICING
SERVICE PRICE
INTERNATIONAL COLLECTIONS*
$ 25.00-$ 4,000.00 $ 16.00
$ 4,000.01-$10,000.00 $ 26.00
$10,000.01+ $ 51.00 maximum (1/4of 1%)
* Charge deducted from the face amount of the check. $8.50 processing fee
charged to analysis.
11
SCHEDULE 2
AUTHORIZED OFFICERS
Xxxxxxxxxxx Xxxxx
Xxxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx
12
Exhibit 7(i)
13
AMENDMENT TO AMENDED AND RESTATED CUSTODIAN AGREEMENT
Amendment dated September 6, 2002, to the Amended and Restated
Custodian Agreement (the "Custodian Agreement"), dated July 1, 2001, by and
between State Street Bank and Trust Company (the "Custodian") and USAA MUTUAL
FUND, INC., on behalf of each of its Series (each a "Fund").
WHEREAS the Custodian serves as the custodian of each Fund's assets
pursuant to the Custodian Agreement;
WHEREAS the Funds may appoint one or more banks identified on Appendix
A to this Amendment, as amended from time to time, to serve as co-custodians
with Custodian for the Funds (each, a "Repo Custodian") for the limited purpose
of the Funds' engaging in tri-party repurchase agreement transactions
("Tri-Party Repos");
WHEREAS the Funds may direct the Custodian to make "free delivery" to
one or more Repo Custodians of cash or other assets maintained in custody by the
Custodian for the Funds pursuant to the Custodian Agreement for purposes of
engaging in Tri-Party Repos; and
WHEREAS the Custodian and the Funds desire to amend the Custodian
Agreement to permit the Custodian to make "free delivery" of cash and other
assets of the Funds to Repo Custodians from time to time;
NOW THEREFORE, the Custodian and the Fund hereby agree to amend the
Custodian Agreement by adding the following provisions thereto:
1. Notwithstanding anything to the contrary in the Custodian Agreement, upon
receipt of Proper Instructions (as defined in the Custodian Agreement), the
Custodian shall deliver cash and/or other assets of the Funds to any account or
accounts identified and maintained for the Funds by a Repo Custodian and listed
on Appendix A attached hereto, which delivery may be made without
contemporaneous receipt by the Custodian of cash or other assets in exchange
therefor. Upon such delivery of cash or other assets in accordance with such
Proper Instructions, the Custodian shall have no further responsibility or
obligation to the Funds as a custodian of the Funds with respect to the cash or
assets so delivered. In preparing reports of monies received or paid out of the
Fund or of assets comprising the Fund, the Custodian shall be entitled to rely
upon information received from time to time from the Repo Custodian and shall
not be responsible for the accuracy or completeness of such information included
in the Custodian's reports until such assets are received by the Custodian.
2. The Funds may amend Appendix A of this Amendment from time to time to add or
delete a Repo Custodian or to change the identification of the account by a Repo
Custodian for the Funds by delivering Special Instructions (as defined herein)
to the Custodian. The term "Special Instructions" shall mean written
instructions executed by
at least two officers of the Funds holding the office of Vice President or
higher. In all other respects, each Custodian Agreement shall remain in full
force and effect and the Custodian and the Funds shall perform their respective
obligations in accordance with the terms thereof.
EXECUTED to be effective as of the date set forth above.
USAA MUTUAL FUND, INC.
On Behalf of its Series
By: /S/ XXXXXXXX X. XXXXXXX
--------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
STATE STREET BANK AND TRUST COMPANY
By: /S/ XXXXXX X. XXXXXX
------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
2
APPENDIX A
to
Amendment to Amended and Restated Custodian Agreement
Between State Street Bank and Trust Company and
USAA Mutual Fund, Inc. on Behalf of its Series
Dated: September 6, 2002
TRI-PARTY REPO CUSTODIAN BANKS ACCOUNT NUMBERS
The Bank of New York
JPMorgan Chase Bank
Authorized Signatures:
By: /S/ CA XXXXXXX By: SIGNATURE UNLEGIBLE
-------------- --------------------
Title: VICE PRESIDENT Title: VP EQUITY INVESTMENTS
-------------------- ---------------------
Date: 9/13/02 Date: 9/16/02
--------------- ----------------
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