SPECIAL CUSTODY ACCOUNT AGREEMENT
AGREEMENT ("Agreement"), dated as of December 11, 2002, by and
among CUSTODIAL TRUST COMPANY, in its capacity as Custodian hereunder
("Custodian"), HILLVIEW INVESTMENT TRUST II, solely on behalf of HILLVIEW/REMS
LEVERAGED REIT FUND ("Customer"), and BEAR, XXXXXXX SECURITIES CORP. ("Broker").
WHEREAS, Broker is a securities broker-dealer and is a member
of several national securities exchanges; and
WHEREAS, Customer desires from time to time to execute various
securities transactions, including short sales (which are permitted by the
investment policies of Customer), and in connection therewith has executed the
Customer Agreement (as defined herein) which provides for margin transactions;
and
WHEREAS, to facilitate Customer's transactions in short sales
of securities, Customer and Broker desire to establish procedures for the
compliance by Customer and Broker, as applicable, with the provisions of
Regulation T of the Board of Governors of the Federal Reserve System, the margin
rules of various exchanges and other applicable margin requirements ("Margin
Rules") and other laws, rules and regulations ("Other Regulations"); and
WHEREAS, to assist Broker and Customer in complying with the
Margin Rules and Other Regulations, Custodian is prepared to act as Custodian to
hold Collateral as defined below.
NOW, THEREFORE, Customer, Custodian and Broker hereby agree as
follows:
1. DEFINITIONS
As used herein, the following terms have the following
meanings:
(a) "Adequate Margin" means, as Advised by Broker to Customer,
Collateral having such value as is adequate, in Broker's reasonable judgment
under the Margin Rules and the internal policies of Broker, to secure the
Secured Obligations.
(b) "Advice from Broker" or "Advice" means a written notice
sent to Customer or Custodian or transmitted by a facsimile sending device,
except that Advice for initial or additional Collateral or with respect to
Broker's ability to effect a short sale for Customer may be given orally. With
respect to any short sale or Closing Transaction, the Advice from Broker shall
mean a standard confirmation in use by Broker and sent or transmitted to
Customer and Custodian. Anything herein to the contrary notwithstanding, any
Advice from Broker communicated to Custodian, as aforesaid, and directing
transfer or redemption of any Financial Asset comprising the Collateral shall
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constitute an Entitlement Order of Broker. With respect to substitutions or
releases of Collateral, Advice from Broker means a written notice signed by
Broker and sent or transmitted to Custodian and Customer. An authorized agent of
Broker will certify to Customer and Custodian the names and signatures of those
employees who are authorized to sign 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.
(c) "Closing Transaction" is a transaction in which Customer
purchases securities which have been sold short.
(d) "Collateral" shall mean each of (i) the Special Custody
Accounts; and (ii) the assets, properties, rights and items (whether now owned
or existing or hereafter acquired or coming into existence) that are on the date
of this Agreement or may at any time and from time to time hereafter be
deposited by or on behalf of Customer to, held, contained, evidenced,
represented or reflected in or by, or related to or arising from, any Special
Custody Account (including, in each case, without limitation, (A) any and all
Certificated Securities, Uncertificated Securities, Federal Book Entry
Securities, other Securities, Financial Assets, Security Entitlements, other
Investment Property, Instruments, Accounts, General Intangibles, Chattel Paper,
Documents, bank accounts, Securities Accounts and other collateral accounts,
Money, Proceeds of any Collateral and other property, (B) any and all assets,
properties, rights and items of the types described in clause (A) above issued
or distributed to Customer with respect to any Collateral as dividends, interest
payments and other distributions or as a result of any amendment of the
certificate of incorporation or other charter documents, merger, consolidation,
redesignation, reclassification, purchase or sale of assets, dissolution, or
plan of arrangement, compromise or reorganization of the issuer of any
Collateral, (C) any rights incidental to the ownership of any Collateral,
including voting, conversion and registration rights and rights of recovery for
violations of applicable securities laws and (D) to the extent not otherwise
covered above, the proceeds of the exercise, redemption, sale or exchange of any
Collateral).
(e) "Customer Agreement" means the Institutional Account
Agreement, as it may be amended, supplemented or otherwise modified from time to
time, between Customer and Broker.
(f) "Default" has the meaning assigned to that term in Section
6.
(g) "DTC" means The Depository Trust Company or any successor
thereto.
(h) "DTC Participant" means any Person that is eligible to
maintain, and maintains, one or more accounts with the DTC.
(i) "Eligible Assets" means, collectively, cash and such other
assets, properties, rights and items as Broker shall from time to time Advise
Customer are acceptable to Broker.
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(j) "Fed" means any Federal Reserve Bank.
(k) "Fed Member" means any Person that is eligible to
maintain, and maintains, one or more book-entry accounts in the name of such
Person with the Fed.
(l) "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. [ss. 306.115 through ss. 306.122] [Part 357].
(m) "Federal Book Entry Securities" means Securities and other
Collateral maintained in the form of entries on the records of the Fed.
(n) "Insolvency" means that: (i) either Customer or Custodian
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 or Custodian 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 political 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 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
undismissed or unstayed for a period of 60 days or any of the actions sought in
such proceeding (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) either Customer or Custodian shall take any corporate, partnership or
other action to authorize, or shall approve, consent to or acquiesce in, any of
the actions set forth above in this definition.
(o) "Instructions from Customer" or "Instructions" means a
request, direction or certification in writing signed by Customer and sent to
Custodian or Broker or transmitted 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
or transmitting from time to time. When used herein, the term "Instruct" shall
mean the act of sending an Instruction from Customer.
(p) "NYUCC" means the Uniform Commercial Code as in effect
from time to time in the State of New York.
(q) "Person" means an individual, partnership, corporation,
firm, business trust, joint stock company, trust, unincorporated association,
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joint venture, association, company, division of a corporation, governmental
authority or other entity of whatever nature.
(r) "Receipt of Payment" means receipt by Custodian of (1) a
certified or official bank check or wire transfer to Custodian; (2) a written or
telegraphic advice from a registered clearing agency that funds have been or
will be credited to the account of Custodian; or (3) a transfer of funds from
any of Broker's accounts maintained at Custodian.
(s) "Receipt of Securities" means receipt by Custodian of (1)
securities in proper form for transfer; or (2) a written or telegraphic advice
from a registered clearing agency that securities have been credited to the
account of Custodian for the Special Custody Account.
(t) "Revised Article 8" means Article 8 of the NYUCC"
(including the corresponding, or successor, sections and provisions) as in
effect from time to time.
(u) "Revised Article 9" means Article 9 of the NYUCC
(including the corresponding, or successor, sections and provisions) or in
effect from time to time.
(v) "Right" 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, such as are
listed in the definition of "Collateral").
(w) "Secured Obligations" means any and all obligations
(whether now existing or hereafter from time to time arising, in each case
pursuant to the Customer Agreement or this Agreement) to Broker of Customer.
(x) "Security Interest" has the meaning assigned to that term
in Section 2(b).
(y) "Special Custody Account" has the meaning assigned to that
term in Section 2(a).
The following terms have the respective meanings assigned in
the NYUCC Sections: "Account" (NYUCC ss. 9-106), "Certificated Security" (NYUCC
ss. 8-102), "Chattel paper" (NYUCC ss. 9-105), "Control" (NYUCC ss. 8-106)
"Deliver" or "Delivery" (NYUCC. ss. 8-301) "Documents" (NYUCC ss. 9-105),
"Entitlement order" (NYUCC ss. 8-102), "Entitlement holder" (NYUCC ss. 8-102),
"Financial Asset" (NYUCC ss. 8-102), "General Intangibles" (NYUCC ss. 9-106),
"Investment Property" (NYUCC. ss. 9-115), "Money" (NYUCC ss. 1-201), "Proceeds"
(NYUCC ss. 9-306), "Securities Account" (NYUCC ss. 8-501), "Security" (NYUCC ss.
8-102) "Securities Intermediary" (NYUCC ss. 8-102), "Securities Intermediary's
Jurisdiction" (NYUCC ss. 8-110), "Security Entitlement" (NYUCC. ss. 8-102) and
"Uncertificated Security" (NYUCC ss. 8-102).
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2. SPECIAL CUSTODY ACCOUNTS.
(a) Opening Special Custody Accounts. Custodian shall, at the
request of Customer and Broker, open one or more separate special custody
accounts, each such account to be entitled "Special Custody Account for Bear,
Xxxxxxx Securities Corp. as Pledgee of "Hillview/REMS Leveraged REIT Fund" (each
a "Special Custody Account") and shall hold in each Special Custody Account all
cash and other assets, properties, items and rights received by Custodian from
time to time, pursuant to this Agreement, for deposit (as Advised by Broker or
Instructed by Customer) into such Special Custody Account. Each Special Custody
Account shall be a Securities Account in the name of Customer and shall be
subject to the sole Control of Broker. Customer shall deposit Eligible Assets
into each Special Custody Account. Customer shall insure that the value (as from
time to time determined by Broker in its reasonable judgment and notified by
Broker to Customer) of all Eligible Assets from time to time on deposit in the
Special Custody Account(s) is at least equal to the Adequate Margin for the
Secured Obligations (as from time to time determined by Broker in its reasonable
judgment and notified by Broker to Customer). Upon Advice that the value (so
determined) of the Eligible Assets in the Special Custody Account(s) is less
than the Adequate Margin for the Secured Obligations, Customer shall promptly
deposit therein additional Eligible Assets with a value (so determined)
sufficient to remedy such deficiency. Customer agrees to Instruct Custodian (and
Custodian agrees to comply with such Instructions) as to the cash and other
assets, properties, items and rights which Custodian is to deposit and maintain
in each Special Custody Account and is to identify on Custodian's books and
records as subject to Broker's Security Interest. All Collateral shall be held
by Custodian as agent of and Custodian for Broker and may be released only in
accordance with the terms of this Agreement or as required by applicable law.
(b) Security Interest. To secure its obligations to Broker
under this Agreement, Customer hereby grants to Broker a continuing lien on and
security interest in all Collateral (the "Security Interest"), which Security
Interest shall, to the fullest extent provided by law of the State of New York,
be a first priority perfected security interest, including the Proceeds thereof.
The Collateral shall at all times remain the property of Customer subject only
to the extent of the interest and rights therein of Broker as pledgee and
secured party thereof. Such Security Interest shall terminate at such time as
Collateral is released from Special Custody Account as provided herein. Each of
Customer, Broker and Custodian hereby agrees that all Collateral will be held
for Broker by Custodian as Securities Intermediary, on behalf of Broker separate
and apart from any other property of Customer which may be held by Custodian.
The Collateral consisting of, or held, contained, evidenced, represented or
reflected in or by, or related or arising from, any Special Custody Account
shall secure all Secured Obligations.
(c) Custodian Representations, Etc. Custodian represents,
warrants, covenants and agrees as follows:
(i) Custodian is and will at all times remain, and will at all
times maintain the Special Custody Accounts and all other
Collateral in its capacity as, (A) a "bank" (as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as
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amended), (B) a Securities Intermediary with notice of
Broker's Security Interest, and (C) 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 such other clearing corporation as Customer and
Broker shall agree. Custodian shall insure 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
such other clearing corporation in accordance with NYUCC
Article 8. Custodian shall also insure 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.
(ii) Custodian shall cause each Special Custody Account and
the Collateral 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). Custodian shall not deposit into any Special
Custody Account any cash, assets, properties, rights or items
other than in accordance with this Agreement.
(iii) This Agreement is the legal, valid and binding
obligations of Custodian, enforceable against Custodian in
accordance with its respective terms.
(iv) The Collateral is not, and will not be, subject to (and
Custodian hereby irrevocably waives) any Right in favor of
Custodian or any Person claiming through Custodian (other than
the Security Interest in favor of Broker and the Rights of
Customer permitted pursuant to this Agreement). Custodian has
not received any notice, and does not know, of any Right of
any Person (other than the Security Interest and the Rights of
Customer permitted pursuant to this Agreement). Any Rights
that Customer may have in the Collateral shall be subject in
all respects to the Security Interest in accordance with this
Agreement.
(v) Each Special Custody Account is, and will (and Custodian
has taken and shall continue to take all steps to insure that
such Special Custody Account will) at all times remain, under
the sole Control of Broker. To that end, all Certificated
Securities and Uncertificated Securities carried in a Special
Custody Account will, by virtue of being held under such
Control, be deemed to have been Delivered to Broker.
(vi) Custodian will treat all Collateral (including, without
limitation, all cash comprising the Collateral) as Financial
Assets, and will treat Broker as entitled to exercise any and
all Rights, and to benefit from any and all property
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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).
Custodian shall hold all Collateral solely for the benefit of
Broker, shall comply with any and all Entitlement Orders
originated by Broker (without further consent by Customer, any
other Entitlement Holder or any other Person), shall accept
Instructions as to 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 other
Person (except that Custodian shall accept Instructions from
the Customer with respect to the corporate actions set forth
in Section 2(vii)(C) of this Agreement so long as such
Instructions do not require the release of any Collateral or
the proceeds thereof from a Special Custody Account)), and
shall not release to Customer (except as otherwise specified
in this Agreement), dispose of, or pledge, re-pledge,
hypothecate or rehypothecate, 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.
(vii) As promptly as practicable, Custodian (A) shall give all
notices and directions, and will take all actions, on its part
required to be given or taken (including, without limitation,
all notices and directions to the DTC and the Fed) to preserve
and protect the validity, perfection and priority of the
Security Interest, (B) shall send to Broker and Customer or
Customer's designated agent with written confirmation of each
transfer into and out of each Special Custody Account.
Custodian shall also confirm in writing to Broker and Customer
all pledges, releases or substitutions of Collateral, shall
supply Broker and Customer with a monthly statement of
Collateral held, and transactions in each Special Custody
Account for such month and, upon request of Broker or
Customer, shall notify Broker and Customer of the types and
value of Collateral carried in each Special Custody Account
(it being understood that Custodian shall have no
responsibility for determining the value of Collateral) and
(C) shall be solely responsible to the Customer for notifying
the Customer of capital change information and corporate
actions of which Custodian receives notice affecting
securities held by it in the Special Custody Account
including, but not limited to, securities called for
redemption, the organization of protective committees,
reorganizations, mergers, consolidations or similar
proceedings and for following Customer's Instructions in
relation to the foregoing.
(d) Excess Collateral. Upon the request of Customer, Broker
shall Advise Custodian and Customer whenever the value of the Collateral in any
Special Custody Account is in excess of the Adequate Margin then required for
the Secured Obligations. At Customer's request and upon Broker's Advice, such
excess shall be transferred from such Special Custody Account to such other
account of Customer as Customer shall direct. Customer represents and warrants
to Broker that it has good, sufficient and legal title to the Collateral and
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that Customer has rights in and the full power to transfer each item of the
Collateral upon which it purports to xxxxx x xxxx hereunder. In addition, the
Customer represents and warrants to Broker that except for the security interest
created in favor of Broker, the Collateral is free and clear of all liens
(including, but not limited to, any lien, mortgage, pledge, security interest,
charge or encumbrance of any kind, whether voluntary or involuntary (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest)). Customer represents
and warrants to Broker that with respect to Collateral delivered in physical
form, such 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
(e) Substitution of Collateral. Upon the request of Customer,
an item or items of Collateral in a Special Custody Account may be returned to
Customer upon the deposit by Customer of additional Eligible Assets into the
Special Custody Account so as to maintain the value (as determined by Broker as
provided in Section 2(a)) of the Eligible Assets in the Special Custody Account
to that which is at least equal to Adequate Margin for the Secured Obligations
(as determined by Broker as provided in Section 2(a)). Upon such a request and
upon Broker's Advice, which Advice will be given as soon as is reasonably
practical (as determined in the sole discretion of Broker) following the deposit
of the additional Eligible Assets as aforesaid, the item or items of Collateral
to be returned to Customer shall be transferred from the applicable Special
Custody Account to an account of Customer at Custodian.
(f) Accounts and Records. Custodian shall maintain accounts
and records for the Collateral in each Special Custody Account to the extent
necessary to comply with and as more fully described in Sections 2(c) and 5(a).
Custodian confirms and agrees that it will make entries in its books of account
showing Broker's first and prior Security Interest in the Collateral.
(g) Tax Reporting. Customer, Custodian and Broker agree that
all items of income, gain, expense and loss recognized in any Special Custody
Account shall be reported by Broker to the Internal Revenue Service and all
state and local taxing authorities under the name and taxpayer identification
number of Customer.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
(a) Short Sales. From time to time, Customer may place orders
with Broker for the short sale of securities. Prior to the acceptance of such
orders, Broker will Advise Customer of Broker's ability to borrow such
securities or other properties and acceptance of short sale orders will be
contingent upon same.
(b) Open Short Sales Balance. Broker shall, based on the
closing market price on each business day, compute the aggregate net credit or
debit balance on Customer's open short sales and Advise Customer by 11:00 A.M.
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New York time on the next business day (each a "Determination Day") of the
amount of the net debit or credit, as the case may be. If Broker has provided
such Advice to Customer, Customer will cause Collateral (other than cash) in an
amount equal to such net debit balance to be paid to the Special Custody Account
by the close of business on such Determination Day (it being understood that the
market value of all Collateral shall be determined by Broker in its sole
discretion). If a net credit balance exists on a Determination Day, Broker will
pay such credit balance to Customer by the close of business on such
Determination Day. As Customer's open short positions are marked to market each
business day, payments will be made by or to Customer to reflect changes (if
any) in the credit or debit balances. To the extent payments are not made as
aforesaid, Broker will charge interest on debit balances and pay interest on
credit balances. Balances will be appropriately adjusted when short sales are
closed out.
4. PLACING ORDERS
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 hereby authorizes Broker to xxxx such order as being "short", and
when placing with Broker any order to sell long for Customer's account, 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 long
account as above provided is for securities then owned by Customer and, 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 then to deliver such securities to Broker 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 by
applicable law).
5. CERTAIN RIGHTS AND DUTIES OF CUSTODIAN
(a) Generally. Custodian shall receive and hold in each
Special Custody Account, as agent of and Custodian for Broker and upon the terms
of this Agreement, all Collateral required (as Advised by Broker or Instructed
by Customer) to be deposited into such Special Custody Account and, except as
provided in Section 5(b), shall receive and hold all monies and other property
paid, distributed 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 money or securities to be delivered
to it or to determine that the amount and form of assets delivered to it comply
with any applicable requirements. Custodian may hold the Securities in each
Special Custody Account in bearer, nominee, book entry, Securities Entitlement
or other form and in depository or clearing corporation, with or without
indicating that the Securities are held hereunder; provided, however, that all
Securities and other Collateral held in the Special Custody Account shall be
identified on Custodian's records as subject to this Agreement and Broker's
first and prior Security Interest therein and shall be in a form that permits
transfer without additional authorization or consent of Customer.
(b) Dividends and Interest. Any dividends or interest paid
with respect to the Collateral held in any Special Custody Account shall, when
collected, be paid by Custodian to Customer or Customer's designee; provided
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that, upon Advice of Broker to Custodian that a Default has occurred and is
continuing (and so long as Broker shall not have Advised Custodian that such
Default is no longer continuing), Custodian shall apply such dividends and
interest in accordance with the Advice from time to time of Broker to Custodian.
(c) Security Interest. Except as otherwise specified in this
Agreement, Custodian shall have no responsibility for the validity or
enforceability of the Security Interest.
(d) Limitation of Custodian's Liability. Custodian's duties
and responsibilities are set forth in this Agreement. Custodian shall act only
upon receipt of Advice from Broker regarding release or substitution of
Collateral. 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 negligence and may
rely 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) imposed on or incurred by Custodian arising out of any
action or omission of Custodian in accordance with any notice or Instruction of
Broker under this Agreement, except for losses or liabilities arising out of
Custodian's negligence, recklessness or willful misconduct. 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 of the
Board of Governors of the Federal Reserve System and the other Margin Rules, or
with any rules or regulations of the OCC. Custodian shall not be liable to any
party for any acts or omissions of the other parties to this Agreement.
(e) Compensation. Custodian shall be paid as compensation for
its services pursuant to this Agreement such compensation as may from time to
time be agreed upon in writing between Customer and Custodian.
6. DEFAULT
In the event (each a "Default") of (i) failure by Customer to
maintain Adequate Margin in respect of any Secured Obligation as herein
provided, or (ii) failure by Customer to make any payment hereunder or under the
Customer Agreement when due (including, upon demand by Broker, payment of any
losses sustained by Broker as may occur under circumstances contemplated in
Section 3 above), or (iii) failure by Customer or Custodian to timely comply
with any obligation on Customer's or Custodian's part to be performed or
observed under this Agreement or the Customer Agreement or (iv) failure of any
representation or warranty of Customer or Custodian hereunder to be accurate in
any material respect or (v) Customer's or Custodian's Insolvency, then, upon any
such Default, Broker shall have the right to (1) effect a Closing Transaction or
a buy-in of any Securities of which Customer's account may be short, (2) cause
such Special Custody Account to be re-registered in Broker's own name or
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transfer such Special Custody Account to another Securities Intermediary in
Broker's sole name, (3) remove any Collateral from such Special Custody Account
and register such Collateral in Broker's name or in the name of Broker's,
Securities Intermediary, agent or nominee or any of their nominees, (4) exercise
any voting, conversion, registration, purchase or other Rights of a holder of
any Collateral 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, (5) collect, including by legal action, any notes,
checks or other instruments for the payment of money included in the Collateral
and compromise or settle with any obligor of such instruments, and (6) exercise
any and all rights and remedies provided under the Customer Agreement, the
NYUCC, Revised Article 8 and Revised Article 9 or otherwise available under
applicable law. Upon Advice from Broker (stating that, pursuant to this
Agreement, the condition precedent to Broker's right to receive Collateral
(including without limitation all Proceeds thereof) free of payment has
occurred), Custodian shall deliver such Collateral free of payment to Broker.
Custodian will provide prompt telephone notice to Customer of any receipt by
Custodian of Advice from Broker to deliver Collateral free of payment, and shall
promptly effect delivery of Collateral 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 for such
Collateral, or in the event such principal market is closed, in a manner
commercially reasonable for such. Until there is a Default, the Broker shall not
sell or advise the Custodian to sell any Securities held in the Special Custody
Account.
7. LIMITATION OF BROKER 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 negligence, willful misconduct or bad faith. Notwithstanding
anything set forth in this Agreement, Broker shall not be liable for any losses
caused directly or indirectly by any inability of Broker to perform occasioned
by suspension of trading, wars, civil disturbances, strikes, natural calamities,
labor or material shortages, government restrictions, acts or omissions of
exchanges, specialists, markets, clearance organizations or information
providers, delays in mails, delays or inaccuracies in the transmission of orders
or information, governmental, exchange or self-regulatory organization laws,
rules or actions, or any other causes beyond Broker's control, or for any
consequential, incidental, punitive, special or indirect damages, economic loss
or lost profits, even if Broker is advised of the possibility of such damages or
loss.
8. CUSTOMER REPRESENTATIONS, ETC.
Customer represents, warrants, covenants and agrees that:
(a) Customer is and at all times during the life of this
Agreement will be the lawful legal or beneficial owner of the Collateral, in
each case (i) with full power and authority (including, without limitation, to
sell, transfer, assign, convey, contribute or otherwise dispose of the
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Collateral, subject to the Security Interest (including, without limitation, 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), and otherwise to deal (in accordance with this Agreement and the
Customer Agreement) with, the Special Custody Accounts and the cash and the
other assets, properties, rights and items from time to time constituting, or
purporting to constitute, Collateral and (ii) free of any and all Rights
whatsoever (other than the Security Interest).
(b) 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 its rights and remedies hereunder.
(c) This Agreement constitutes the legal, valid and binding
obligation of Customer, enforceable against Customer in accordance with its
terms, subject to applicable bankruptcy reorganization, insolvency, moratorium
or similar laws affecting creditors' rights generally and applicable principles.
(d) 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 insure that each Special Custody Account is, and will at all times
remain under the Control of Broker.
(e) The execution, delivery and performance of this Agreement
and the Customer 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.
(f) 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 Customer
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 Customer Agreement or at law.
(g) Customer shall take all steps requested by Broker to
secure for Broker, its successors and assigns the benefits of this Agreement,
including such steps as may be reasonably requested by Broker to perfect the
security interests contemplated by this Agreement, including, whether or not a
Default has occurred, endorsing and delivering checks, notes and other
instruments for the payment of money in the name and on behalf of Customer,
endorsing and delivering Securities certificates in the name and on behalf of
Customer, executing and delivering in the name and on behalf of Customer
Instructions to the issuers of Uncertificated Securities and executing and
filing in the name and on behalf of Customer financing statements and
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continuations and amendments to financing statements in any State of the United
States and Forms 4, 5, 144 and Schedules 13D and 13G with the United States
Securities and Exchange Commission. 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.
(h) 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 with respect thereto.
9. TERMINATION
(a) Any of the parties hereto may terminate this Agreement by
notice in writing to the other parties hereto; provided, however, that (i) the
status of any short sales, and of Collateral held at the time of such notice to
margin such short sales shall not be affected by such termination until the
release of such Collateral pursuant to applicable law or regulations or rules 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 entitled to terminate this
Agreement unless and to the extent that, immediately before such termination,
(A) Customer shall have also been entitled to terminate this Agreement in
accordance with clause (ii) above or (B) the Collateral shall have been
transferred to Broker or its designee, and Broker shall continue to have a valid
and enforceable perfected first-priority lien and Security interest in the
Collateral.
(b) The Security Interest shall terminate (i) with respect to
Collateral 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 in
which the Security Interest shall have terminated in accordance with the
preceding sentence shall be transferred to Customer or its designee.
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 notice of termination shall be sent by certified mail, in
each case addressed (and oral communications shall be directed to the following
telephone numbers):
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(a) if to Custodian, to:
Custodial Trust Company
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
(b) if to Customer, to:
Hillview Investment Trust/II
000 Xxx Xxxxx Xxxx.
Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
(c) if to Broker, to: Bear, Xxxxxxx Securities Corp.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone: 000-000-0000
Facsimile: 000-000-0000
or, in the case of each party hereto, such other address as such party shall
notify to the other parties hereto 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 Rev. xx.xx. 9-103(6)(e) and 8-110),
Custodian is the Securities Intermediary, and the State of New York is the
Securities Intermediary's jurisdiction.
(b) Each of Broker, Custodian and Customer hereby consents (i)
to the jurisdiction of the courts of the State of New York sitting in New York
City and the courts of the United States of America for the Southern District of
New York; and (ii) that any suit, action, proceeding or dispute that may arise
from time to time out of or in connection with this Agreement or any and all of
the Collateral may be brought, or initiated and settled in such courts. Each of
Broker, Custodian and Customer waives any objection that it may now or hereafter
have to the venue of any such suit, action, proceeding or settlement in any such
court, or that such suit, proceeding or settlement was brought in an
inconvenient forum, and agrees not to plead or claim the same. Each of Custodian
and Customer authorizes the service of process on itself by registered or
certified mail or courier service c/o its address referred to in section 10.
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(c) To the maximum extent permitted by applicable law, each of
Broker, Customer and Custodian irrevocably waives all right to trial by jury in
any suit, action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or related to this Agreement or any and all of the
Collateral.
12. THIS AGREEMENT CONTROLS
Notwithstanding anything to the contrary set forth in the
Customer Agreement, in the event of any inconsistency between this Agreement and
the Customer Agreement, the terms of this Agreement shall prevail.
13. COUNTERPARTS
This Agreement may be executed in any number of counterparts
and shall become effective at such time as counterparts executed by all of the
parties to this Agreement have been delivered. Each copy of this Agreement that
includes counterparts executed by each party to this Agreement shall be an
original hereof.
14. CAPTIONS/HEADINGS
The captions and headings preceding the text of each section
herein shall be disregarded in connection with the interpretation of this
Agreement.
15. LIMITATION OF LIABILITY
To the extent that the trustees of Hillview Investment Trust
II are regarded as entering into this Agreement, they do so only as trustees
thereof and not individually. The obligations under this Agreement shall not be
binding upon any trustee, officer or employee of Hillview Investment Trust II
individually, or upon any holder of shares issued by Hillview Investment Trust
II individually, but shall be binding only upon the assets and property of
Hillview/REMS Leveraged REIT Fund. Such trustees, officers, employees and
holders, when acting in such capacities, shall not be personally liable under
this Agreement, and Bear Xxxxxxx shall look solely to the assets and property of
Hillview/REMS Leveraged REIT Fund for the performance of this Agreement thereby
and for the payment of any claim against Hillview/REMS Leveraged REIT Fund
pertaining to this Agreement.
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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.
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HILLVIEW INVESTMENT TRUST II,
solely on behalf of
Hillview/REMS Leveraged REIT Fund
By: /s/Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
CUSTODIAL TRUST COMPANY
By: /s/_____________
Name:
Title:
BEAR, XXXXXXX SECURITIES CORP.
By: /s/_____________
Name:
Title:
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