CUSTODIAN AGREEMENT
CUSTODIAN AGREEMENT ("Agreement") made as of this 17th day of November,
1999, between X.XXX FUNDS, a business trust organized under the laws of the
State of Delaware (the "Trust"), and INVESTORS BANK & TRUST COMPANY, a
Massachusetts trust company (the "Bank").
WHEREAS, the Trust is a registered investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), consisting of each
of the separate series listed on Appendix A hereto (as such Appendix A may be
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amended from time to time) (each a "Fund" and collectively, the "Funds");
WHEREAS, pursuant to an Investment Advisory Agreement between the Trust
and X.xxx Asset Management, Inc (the "Adviser"), dated November 17, 1999, the
Adviser has agreed to provide or procure custodial services for the Trust;
WHEREAS, the Adviser desires to appoint the Bank as the Trust's
custodian, and the Trust desires to place and maintain all of its portfolio
securities and cash in the custody of the Bank; and.
WHEREAS, the Bank has at least the minimum qualifications required by
Section 17(f)(1) of the Investment Company Act of 1940, as amended ("1940
Act"), to act as custodian of the portfolio securities and cash of the Trust,
and has indicated its willingness to so act, subject to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Adviser hereby appoints the Bank as
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custodian of the portfolio securities and cash of each of its Funds delivered
to the Bank as hereinafter described, and the Trust hereby approves such
appointment. The Bank agrees to act as custodian upon the terms and conditions
hereinafter set forth. For the services rendered pursuant to this Agreement the
Adviser agrees to pay to the Bank the fees set forth on Appendix B hereto.
2. Definitions. Whenever used herein, the terms listed below will
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have the following meaning:
2.1 Authorized Person. "Authorized Person" will mean any of the persons
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duly authorized to give Proper Instructions or otherwise act on behalf of the
Trust by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 Board. "Board" will mean the Board of Trustees of the Trust.
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2.3 Security. The term "security" as used herein will have the same
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meaning assigned to such term in the Securities Act of 1933, as amended ("1933
Act"), including, without limitation, any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or participation
in any profit sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, any put, call,
straddle, option, or privilege on any security, certificate of deposit, or
group or index of securities (including any interest therein or based on the
value thereof), or any put, call, straddle, option, or privilege entered into
on a
national securities exchange or in the over-the-counter market relating to
a foreign currency, or, in general, any interest or instrument commonly known
as a "security", or any certificate of interest or participation in, temporary
or interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures contracts, forward contracts and options thereon.
2.4 Portfolio Security. "Portfolio Security" will mean any security
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owned by any Fund.
2.5 Officers' Certificate. "Officers' Certificate" will mean, unless
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otherwise indicated, any request, direction, instruction, or certification in
writing signed by any Authorized Person of the Trust.
2.6 Book-Entry System. "Book-Entry System" shall mean the Federal
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Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 Depository. "Depository" shall mean The Depository Trust Company
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("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("1934
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. "Proper Instructions" shall mean (i)
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instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the Trust
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Trust shall cause all oral instructions to be promptly confirmed in
writing. The Bank shall act upon and comply with any subsequent Proper
Instruction which modifies a prior Proper Instruction and the sole obligation
of the Bank with respect to any follow-up or confirmatory Proper Instruction
shall be to make reasonable efforts to detect any discrepancy between the
original Proper Instruction and such confirming Proper Instruction and to
report such discrepancy to the Trust. The Trust shall be responsible, at the
Trust's expense, for taking any action, including any reprocessing, necessary
to correct any such discrepancy or error which has resulted because of an error
or omission on the part of the Trust, and to the extent such action requires
the Bank to act, the Trust shall give the Bank specific Proper Instructions as
to the action required. Upon receipt by the Bank of an Officers' Certificate as
to the authorization by the Board to utilize the services of the Bank for the
purposes set forth herein accompanied by a detailed description of procedures
approved by the Trust, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Trust's assets.
3. Separate Accounts. The Bank will segregate the assets of each Fund
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to which this Agreement relates into a separate account for each such
Fund containing the assets of such Fund (and all investment earnings thereon).
Unless the context otherwise requires, any reference in this Agreement to any
actions to be taken by the Trust shall be deemed to refer to the Trust acting
on behalf of one or more of its Funds, any reference in this Agreement to any
assets of the Trust, including, without limitation, any portfolio securities
and cash and earnings thereon, shall be deemed to refer only to assets of the
applicable Fund, any duty or obligation of the Bank hereunder to the Trust
shall be deemed to refer to duties and obligations with respect to such
individual Fund and any obligation or liability of the Trust
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hereunder shall be binding only with respect to such individual Funds, and
shall be discharged only out of the assets of such Funds.
4. Certification as to Authorized Persons. The Secretary or Assistant
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Secretary of the Trust will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank,
of (i) the names and signatures of the Authorized Persons and (ii) the names of
the members of the Board, it being understood that upon the occurrence of any
change in the information set forth in the most recent Officers' Certificate on
file (including without limitation any person named in the most recent
Officers' Certificate who is no longer an Authorized Person as designated
therein), the Secretary or Assistant Secretary of the Trust will sign a new or
amended Officers' Certificate setting forth the change and the new, additional
or omitted names or signatures. The Bank will be entitled to rely and act upon
any Officers' Certificate given to it by the Trust which has been signed by
Authorized Persons named in the most recent Officers' Certificate received by
the Bank.
5. Custody of Cash. As Custodian for the Trust, the Bank will open
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and maintain a separate account or accounts in the name of the Trust or in the
name of the Bank, as Custodian of the Trust, and will deposit to the account of
the Trust all of the cash of the Trust, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 hereof, including borrowed funds, delivered
to the Bank, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. Pursuant to the Bank's internal policies regarding the
management of cash accounts, the Bank may segregate certain portions of the
cash of the Trust into a separate savings deposit account upon which the Bank
reserves the right to require seven (7) days notice prior to withdrawal of cash
from such an account. Upon receipt by the Bank of Proper Instructions (which
may be continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding shares of common stock of the Trust, notificat from
the Trust's transfer agent as provided in Section 7, requesting such payment,
designating the payee or the account or accounts to which the Bank will release
funds for deposit, and stating that it is for a purpose permitted under the
terms of this Section 5, specifying the applicable subsection, the Bank will
make payments of cash held for the accounts of the Trust, insofar as funds are
available for that purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the
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Trust, against contemporaneous receipt of such securities by the Bank or
against delivery of such securities to the Bank in accordance with generally
accepted settlement practices and customs in the jurisdiction or market in
which the transaction occurs, registered in the name of the Trust or in the
name of, or properly endorsed and in form for transfer to, the Bank, or a
nominee of the Bank, or receipt for the account of the Bank pursuant to the
provisions of Section 6 below, each such payment to be made at the purchase
price shown on a broker's confirmation of purchase of the securities received
by the Bank or transaction report in the case of Book Entry Paper (as that term
is defined in Section 6.6 hereof) before such payment is made, as confirmed in
the Proper Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
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repurchase or redemption of shares of the Trust offered for repurchase or
redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Trust. For the payment on the
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account of the Trust of dividends or other distributions to shareholders as may
from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services
hereunder and reimbursement of the expenses and liabilities of the Bank as
provided hereunder, fees of any transfer agent, fees for legal, accounting, and
auditing services, or other operating expenses of the Trust.
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5.4 Payment in Respect of Securities. For payments in connection with
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the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Trust, which are held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Trust,
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but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Trust for
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the purpose of collateralizing the obligation to return to the Trust
certificates borrowed from the Trust representing Portfolio Securities, but
only upon redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
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(a) For payments in connection with foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Trust upon the receipt of Proper Instructions, such
Proper Instructions to specify the currency broker or banking institution
(which may be the Bank, or any other subcustodian or agent hereunder, acting as
principal) with which the contract or option is made, and the Bank shall have
no duty with respect to the selection of such currency brokers or banking
institutions with which the Trust deals or for their failure to comply with the
terms of any Foreign Exchange Agreement.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank, pursuant to Proper
Instructions, the Trust agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Trust's
benefit or in which the Trust has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Trust authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Trust on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of the
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Trust or other obligations of the Trust incurred for proper Trust purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person and
certified by its Secretary or Assistant Secretary, naming the person or persons
to whom such payment is to be made, and either describing the transaction for
which payment is to be made and declaring it to be an authorized transaction of
the Trust, or specifying the amount of the obligation for which payment is to
be made, setting forth the purpose for which such obligation was incurred and
declaring such purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as hereinafter
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set forth pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
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6.1 Segregation and Registration. Except as otherwise provided herein,
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the Bank as custodian will receive and hold pursuant to the provisions hereof,
in a separate account or accounts and physically segregated at all times from
those of other persons, any and all portfolio securities which may now or
hereafter be delivered to it by or for the account of each Fund. All such
Portfolio Securities will be held or disposed of by the Bank for, and subject
at all times to, the instructions of the Trust pursuant
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to the terms of this Agreement. subject to the specific provisions herein
relating to Portfolio Securities that are not physically held by the Bank, the
Bank will register all Portfolio Securities (unless otherwise directed by
Proper Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code of 1986, as
amended, and any Regulations of the U.S. Treasury Department or Internal
Revenue Service issued thereunder, and will execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state.
The Trust will, from time to time, furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of each appropriate Fund of the
Trust.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will
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vote any of the Portfolio Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Trust all notices,
proxies and proxy soliciting materials delivered to the Bank with respect to
such Portfolio Securities, such proxies to be executed by the registered holder
of such Portfolio Securities (if registered otherwise than in the name of the
Trust), but without indicating the manner in which such proxies are to be
voted.
6.3 Corporate Action. If at any time the Bank is notified that an issuer
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of any Portfolio Security has taken or intends to take a corporate action (a
"Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or
stock dividend, which Corporate Action requires an affirmative response or
action on the part of the holder of such Portfolio Security (a "Response"), the
Bank shall notify the Trust promptly of the Corporate Action, the Response
requested in connection with the Corporate Action and the Bank's deadline for
receipt from the Trust of Proper Instructions regarding the Response (the
"Response Deadline"). The Bank shall forward to the Trust via telecopier and/or
overnight courier all notices, information statements or other materials
relating to the Corporate Action promptly after receipt of such materials by
the Bank.
(a) The Bank shall act upon a requested Response only after receipt
by the Bank of Proper Instructions from the Trust no later than 5:00 p.m. on
the date specified as the Response Deadline and only if the Bank (or its agent
or subcustodian hereunder) has actual possession of all Portfolio Securities,
consents and other materials needed in order to provide a Response no later
than 5:00 p.m. on the date specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a requested Response if
Proper Instructions relating to such Response and all necessary Portfolio
Securities, consents and other materials needed in order to provide a Response
are not received and in the possession of the Bank by no later than 5:00 p.m.
on the date specified as the Response Deadline. Notwithstanding, the Bank may,
in its sole discretion, use its best efforts to act upon a Response for which
Proper Instructions and/or necessary Portfolio Securities, consents or other
materials are received by the Bank after 5:00 p.m. on the date specified as the
Response Deadline, it being acknowledged and agreed by the parties that any
undertaking by the Bank to use its best efforts in such circumstances shall in
no way create any duty upon the Bank to complete such Response prior to the
Response Deadline.
(c) In the event that the Trust notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline
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shall be 48 hours prior to the Response expiration time set by the Depository
processing such Corporate Action.
6.4 Book-Entry System. Provided (i) the Bank has received a certified
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copy of a resolution of the Board specifically approving deposits of Trust
assets in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to
the Trust's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during
the regular business hours of the Bank (or such agent) be open for inspection
by duly authorized officers, employees or agents of the Trust. Where securities
are transferred to the Trust's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Trust a quantity of securities in a
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal
Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased for
the account of the Trust or shall pay cash collateral against the return of
Portfolio Securities loaned by the Trust upon (i) receipt of advice from the
Book-Entry System that such Portfolio Securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Trust. The
Bank (or its agent) shall transfer securities sold or loaned for the account of
the Trust upon
(i) receipt of advice from the Book-Entry System that payment
for securities sold or payment of the initial cash collateral against the
delivery of Portfolio Securities loaned by the Trust has been transferred to
the Account; and
(ii) the making of an entry on the records of the Bank (or
its agent) to reflect such transfer and payment for the account of the Trust.
Copies of all advices from the Book-Entry System of transfers of Portfolio
Securities for the account of the Trust shall identify the Trust, be maintained
for the Trust by the Bank and shall be provided to the Trust at its request.
The Bank shall send the Trust a confirmation, as defined by Rule 17f-4 of the
1940 Act, of any transfers to or from the account of the Trust;
(d) The Bank will promptly provide the Trust with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding Portfolio
Securities deposited in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a certified
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copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement
and has not delivered an Officer's Certificate to the Bank indicating that the
Board has withdrawn its approval:
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(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and
remit to the Bank on behalf of the Trust all income and other payments thereon
and to take all steps necessary and proper in connection with the collection
thereof;
(b) Registration of Portfolio Securities may be made in the name of
any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through
the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the Portfolio Securities to or for
the account of the Trust and the Trust shall pay cash collateral against the
return of Portfolio Securities loaned by the Trust only upon delivery of the
Portfolio Securities to or for the account of the Trust; and upon any sale of
Portfolio Securities, delivery of the Portfolio Securities will be made only
against payment therefor or, in the event Portfolio Securities are loaned,
delivery of Portfolio Securities will be made only against receipt of the
initial cash collateral to or for the account of the Trust; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Portfolio Security is
lost, destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
(ii) Proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded immediately
to the Bank for prompt transmittal to the Trust;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Trust's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Trust to comply with the recordkeeping
requirements of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Trust may reasonably request
in order to verify the Portfolio Securities held by such Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the Bank
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has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has reapproved the arrangements, the Bank,
upon receipt of Proper Instructions and upon receipt of confirmation from an
"Issuer" (as defined below) that the Trust has purchased such Issuer's
Book-Entry Paper, shall issue and hold in book-entry form, on behalf of the
Trust and each of its Funds, commercial paper issued by issuers with whom the
Bank has entered into a book-entry agreement ("Issuers"). In maintaining
procedures for Book-Entry Paper, the Bank agrees that:
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(a) The Bank will maintain all Book-Entry Paper held by the Trust
in an account of the Bank that includes only assets held by it for customers;
(b) The records of the Bank with respect to the Trust's purchase
of Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Trust and each of its Funds which is included in the
Book-Entry System and shall at all times during the regular business hours of
the Bank be open for inspection by duly authorized officers, employees or
agents of the Trust;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Trust contemporaneous with (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Trust;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof contemporaneous with (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Trust, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Trust; and
(e) The Bank will send to the Trust such reports on its system of
internal accounting control with respect to the Book-Entry Paper as the Trust
may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has received a
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certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and (ii)
for each year following such approval the Board has reapproved the arrangement
and has not delivered an Officer's Certificate to the Bank indicating that the
Board has withdrawn its approval, the Bank shall enter into such immobilization
program with such bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs may
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be physically held by the European branch of the U.S. banking institution that
is the issuer of such Eurodollar CD (a "European Branch"), provided that such
Portfolio Securities are identified on the books of the Bank as belonging to
the Trust and that the books of the Bank identify the European Branch holding
such Portfolio Securities. Notwithstanding any other provision of this
Agreement to the contrary, except as stated in the first sentence of this
subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Trust.
6.9 Options and Futures Transactions.
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(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Trust regarding
escrow or other arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions among the Bank, any
broker-dealer which is a member of the National Association of Securities
Dealers, Inc. (the "NASD"), and registered with the Securities and Exchange
Commission ("SEC") under the 1934 Act and, if necessary, the Trust, relating to
the compliance with the rules of the Options Clearing Corporation and of any
applicable registered national securities exchange or of any similar
organization.
(ii) Unless another agreement requires the Bank to do so, the
Bank shall be under no duty or obligation to see that the Trust has deposited
or is maintaining adequate margin, if
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required, with any broker in connection with any option, nor shall the Bank be
under duty or obligation to present such option to the broker for exercise
unless it receives Proper Instructions from the Trust. The Bank shall have no
responsibility for the legality of any put or call purchased or sold on behalf
of the Trust, the propriety of any such purchase or sale, or the adequacy of
any collateral delivered to a broker in connection with an option or deposited
to or withdrawn from a Segregated Account (as defined in subsection 6.10
below). The Bank specifically, but not by way of limitation, shall not be under
any duty or obligation to: (i) periodically check or notify the Trust that the
amount of such collateral held by a broker or held in a Segregated Account is
sufficient to protect such broker or the Trust against any loss; (ii) effect
the return of any collateral delivered to a broker; or (iii) advise the Trust
that any option it holds, has or is about to expire. Such duties or obligations
shall be the sole responsibility of the Trust.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Trust in accordance with the
provisions of any agreement entered into upon the receipt of Proper
Instructions among the Trust, the Bank and a futures commission merchant
("FCM") registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission ("CFTC") and/or any
Contract Market, or any similar organization or organizations, regarding
account deposits in connection with transactions by the Trust.
(ii) The responsibilities of the Bank as to Futures, puts and
calls traded on commodities exchanges, any FCM account and the Segregated
Account as defined below shall be limited as set forth in subparagraph (a)(ii)
of this Section 6.9 as if such subparagraph referred to FCMs rather than
brokers, and Futures and puts and calls thereon instead of options.
6.10 Segregated Account. The Bank shall, upon receipt of Proper
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Instructions, establish and maintain a Segregated Account or Accounts for and
on behalf of the Trust.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement among
the Trust, the Bank and a broker-dealer registered with the SEC under the 1934
Act and a member of the NASD or any FCM registered under the Commodity Exchange
Act, relating to compliance with the rules of the Options Clearing Corporation
and of any registered national securities exchange or the Commodity Futures
Trading Commission or any registered Contract Market, or of any similar
organizations regarding escrow or other arrangements in connection with
transactions by the Trust;
(ii) for the purpose of segregating cash or Portfolio
Securities in connection with options purchased or written by the Trust or
commodity Futures purchased or written by the Trust;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Trust's
then outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Trust's then outstanding
commitments under reverse repurchase agreements entered into with broker-dealer
firms;
(iv) for the purposes of compliance by the Trust with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release of the SEC or written
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interpretation by the SEC or its Staff relating to the maintenance of
Segregated Accounts by registered investment companies;
(v) for other proper corporate purposes, but only, in the
case of this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the executive committee of
the Board signed by an officer of the Trust and certified by the Secretary or
an Assistant Secretary, setting forth the purpose or purposes of such
Segregated Account and declaring such purposes to be proper corporate purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii)
or (a)(iv) above, for sale or delivery to meet the Trust's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Trust's outstanding forward
commitment or when-issued agreements for the purchase of Portfolio Securities
or reverse repurchase agreements are sold to other parties or the Trust's
obligations thereunder are satisfied by using assets of the Trust other than
those in the Segregated Account or otherwise;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (a)(v)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
--------------------------------------
of Proper Instructions relating to the purchase by the Trust of interest-
bearing fixed-term and call deposits, transfer cash, by wire or otherwise, in
such amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Trust appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made ("Deposit Bank"), and shall
retain such forms of advice or receipt evidencing the deposit, if any, as may
be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Trust and the responsibility of the Bank therefor
shall be the same as and no greater than the Bank's responsibility in respect
of other Portfolio Securities of the Trust and its Funds.
6.12 Transfer of Securities. The Bank will transfer, exchange, deliver or
----------------------
release Portfolio Securities held by it hereunder, insofar as such Portfolio
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this provision of the Agreement
only upon receipt of Proper Instructions. The Proper Instructions shall state
that such transfer, exchange or delivery is for a purpose permitted under the
terms of this Section 6.12, and shall specify the applicable subsection, or
describe the purpose of the transaction with sufficient particularity
10
to permit the Bank to ascertain the applicable subsection. After receipt of
such Proper Instructions, the Bank will transfer, exchange, deliver or release
Portfolio Securities only in the following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Trust, against contemporaneous receipt by the Bank of payment therefor in full,
or against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such
payment is made;
(b) In exchange for or upon conversion into other Portfolio
Securities alone or other Portfolio Securities and cash pursuant to any plan of
merger, consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided, however, that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Portfolio Security at least two business days prior to the date of
tender;
(c) Upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) For the purpose of redeeming in-kind shares of the Trust upon
authorization from the Trust;
(e) In the case of option contracts owned by the Trust, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or retired
or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Trust
by any bank, including the Bank; provided, however, that such Portfolio
Securities will be released only upon payment to the Bank for the account of
the Trust of the moneys borrowed; provided further, however, that in cases
where additional collateral is required to secure a borrowing already made, and
such fact is made to appear in the Proper Instructions, Portfolio Securities
may be released for that purpose without any such payment. In the event that
any pledged Portfolio Securities are held by the Bank, they will be so held for
the account of the lender, and after prior written notice to the Trust from the
lender, in accordance with the normal procedures of the lender and any loan
agreement between the Trust and the lender, that an event of deficiency or
default on the loan has occurred, the Bank may deliver such pledged Portfolio
Securities to or for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such Portfolio Securities, as set forth in the Proper
Instructions received by the Bank before such payment is made;
(i) for the purpose of delivering Portfolio Securities lent by the
Trust to a bank or broker dealer, but only against receipt in accordance with
street delivery custom except as otherwise
11
provided herein, of adequate collateral as agreed upon from time to time by the
Trust and the Bank, and upon receipt of payment in connection with any
repurchase agreement relating to such Portfolio Securities entered into by the
Trust;
(j) for other authorized transactions of the Trust or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Trust and certified by its Secretary or Assistant
Secretary, specifying the Portfolio Securities to be delivered, setting forth
the transaction in or purpose for which such delivery is to be made, declaring
such transaction to be an authorized transaction of the Trust or such purpose
to be a proper corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Trust held by the
-----------
Bank in connection with redemptions and repurchases by the Trust of outstanding
shares, the Bank will rely on notification by the Trust's transfer agent of
receipt of a request for redemption and certificates, if issued, in proper form
for redemption before such payment is made. Payment shall be made in accordance
with the Declaration of Trust and By-laws of the Trust ("Declaration"), from
assets available for said purpose.
8. Merger, Dissolution, etc. of Trust. In the case of the following
----------------------------------
transactions, not in the ordinary course of business, namely, the merger of the
Trust into or the consolidation of the Trust with another investment company,
the sale by the Trust of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Trust and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Trust
set forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate and the
Bank shall be released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
-------------------------------------------
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Trust or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Trust all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the
Trust and hold for the account of the Trust all income, dividends, interest and
other payments or distributions of cash with respect to the Portfolio
Securities held thereunder;
9.2 Present for payment all coupons and other income items held by it for
the account of the Trust which call for payment upon presentation and hold the
cash received by it upon such payment for the account of the Trust;
9.3 Receive and hold for the account of the Trust all securities received
as a distribution on Portfolio Securities as a result of a stock dividend,
share split-up, reorganization, recapitalization, merger, consolidation,
readjustment, distribution of rights and similar securities issued with respect
to any Portfolio Securities held by it hereunder.
12
9.4 Execute as agent on behalf of the Trust all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code of
1986, as amended or the regulations of the U.S. Treasury Department or the
Internal Revenue Service issued thereunder, or by the laws of any state, now or
hereafter in effect, inserting the Trust's name on such certificates as the
owner of the securities covered thereby, to the extent it may lawfully do so
and as may be required to obtain payment in respect thereof. The Bank will
execute and deliver such certificates in connection with Portfolio Securities
delivered to it or by it under this Agreement as may be required under the
provisions of the Internal Revenue Code of 1986, as amended and any regulations
issued thereunder, or under any applicable laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it
upon payment for the account of the Trust; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
------------------------
collect any funds which may, to its knowledge, become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Trust notice actually received by it of any call for
redemption, offer of exchange, right of subscription, reorganization or other
proceedings affecting such Portfolio Securities. If Portfolio Securities upon
which such income is payable are in default or payment is refused after due
demand or presentation, the Bank will promptly notify the Trust in writing of
any default or refusal to pay within two business days from the day on which it
receives knowledge of such default or refusal.
11. Maintenance of the Trust's Records and Accounting Services. The Bank
----------------------------------------------------------
will maintain the Trust's records with respect to transactions for which the
Bank is responsible pursuant to the terms and conditions of this Agreement, and
in compliance with the applicable rules and regulations under the 1940 Act. The
books and records of the Trust maintained by the Bank pertaining to its actions
under this Agreement and reports by the Bank or its independent accountants
concerning its accounting system, procedures for safeguarding securities and
internal accounting controls will be open to inspection and audit at reasonable
times by officers of or auditors employed by the Trust and will be preserved by
the Bank in the manner and in accordance with the applicable rules and
regulations under the 1940 Act. The Bank shall perform fund accounting and
shall keep the Trust's books of account and render statements or copies from
time to time as reasonably requested by the Trust's Treasurer or any other
executive officer of the Trust. The Bank shall assist generally in the
preparation of reports to shareholders of each Fund of the Trust and others,
audits of accounts, and other ministerial matters of like nature.
12. Trust Evaluation and Yield Calculations
---------------------------------------
12.1 Trust Evaluation. The Bank shall compute and, unless otherwise
----------------
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by
the Board, the net asset value and the public offering price of a share of
stock of the Trust, such determination to be made in accordance with the
provisions of the Declaration of the Trust and the Prospectus and Statement of
Additional Information relating to the Trust, as they may from time to time be
amended, and any applicable resolutions of the Board at the time in force and
applicable; and promptly to notify the Trust, the proper exchange and the NASD
or such other persons as the Trust may request of the results of such
computation and determination. In computing the net asset value hereunder,
13
the Bank may rely in good faith upon information furnished to it by any
Authorized Person in respect of (i) the manner of accrual of the liabilities of
the Trust and in respect of liabilities of the Trust not appearing on its books
of account kept by the Bank, (ii) reserves, if any, authorized by the Board or
that no such reserves have been authorized, (iii) the source of the quotations
to be used in computing the net asset value, (iv) the value to be assigned to
any security for which no readily available market price can be obtained, and
(v) the method of computation of the public offering price on the basis of the
net asset value of the shares. The Bank shall not be responsible for any loss
occasioned by such reliance or for any good faith reliance on any quotations
received from a source pursuant to (iii) above.
12.2. Yield and Average Total Return Calculation. The Bank will compute
------------------------------------------
the yield and average annual total return performance results of the Trust
("Return Calculation") in accordance with the provisions of Release No. 33-6753
and Release No. IC-16245 (February 2, 1988) (the "Releases") promulgated by the
Securities and Exchange Commission, and any subsequent amendments thereto,
published interpretations of or general conventions accepted by the staff of
the SEC with respect to such releases or the subject matter thereof
("Subsequent Staff Positions"), subject to the terms set forth below:
(a) The Bank shall compute the Return Calculations for each Fund of
the Trust for the stated periods of time as shall be mutually agreed upon, and
communicate to the Trust in a timely manner the results of each computation.
(b) In performing the Return Calculations, the Bank will derive the
items of data necessary for the computation from the records it generates and
maintains for each Fund of the Trust pursuant Section 11 hereof. The Bank shall
have no responsibility to review, confirm, or otherwise assume any duty or
liability with respect to the accuracy or correctness of any such data supplied
to it by the Trust, any of the Trust's designated agents or any of the Trust's
designated third party providers.
(c) At the request of the Bank, the Trust shall provide, and the
Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to each Fund of the Trust. In the event that the computation methods in
the Releases or the Subsequent Staff Positions or the application to each Fund
of the Trust of a standard or guideline is not free from doubt or in the event
there is any question of interpretation as to the characterization of a
particular security or any aspect of a security or a payment with respect
thereto (e.g., original issue discount, participating debt security, income or
return of capital, etc.) or otherwise or as to any other element of the
computation which is pertinent to the Trust, the Trust or its designated agent
shall have the full responsibility for making the determination of how the
security or payment is to be treated for purposes of the computation and how
the computation is to be made and shall inform the Bank thereof on a timely
basis. The Bank shall have no responsibility to make independent determinations
with respect to any item which is covered by this Section, and shall not be
responsible for its computations made in accordance with such determinations so
long as such computations are mathematically correct.
(d) The Trust shall keep the Bank informed of all publicly
available information and of any non-public advice, or information obtained by
the Trust from its independent auditors or by its personnel or the personnel of
its investment adviser, or Subsequent Staff Positions related to the
computations to be undertaken by the Bank pursuant to this Agreement and the
Bank shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in writing.
13. Additional Services. The Bank shall perform the additional services
-------------------
for the Trust as are set forth on Appendix C hereto. Appendix C may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Trust, at which time the
14
fees set forth in Appendix B shall be appropriately increased as agreed to in
writing by the Bank and the Trust.
14. Duties of the Bank.
------------------
14.1 Performance of Duties and Standard of Care. The Bank will perform
------------------------------------------
all of its duties hereunder in a timely manner as determined by industry
standards in the relevant market as applied to the specific transaction, taking
into account relevant facts and circumstances. In performing its duties
hereunder and any other duties listed on any Schedule hereto, if any, the Bank
will be entitled to receive and act upon the advice of independent counsel of
its own selection, which may be counsel for the Trust, and will be without
liability for any action taken or thing done or omitted to be done in
accordance with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will not be
liable for:
(a) the validity of the issue of any Portfolio Securities purchased
by or for each Fund of the Trust, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for
each Fund of the Trust or the propriety of the amount for which the same are
sold;
(c) the legality of an issue or sale of any shares of each Fund of
the Trust or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any shares of each Fund of
the Trust or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by each Fund of
the Trust or the legality of the distribution of any Portfolio Securities as
payment in kind of such dividend; and
(f) any property or moneys of each Fund of the Trust unless and
until received by it, and any such property or moneys delivered or paid by it
pursuant to the terms hereof. Moreover, the Bank will not be under any duty or
obligation to ascertain whether any Portfolio Securities at any time delivered
to or held by it for the account of the Trust are such as may properly be held
by the Trust under the provisions of its Articles any federal or state statutes
or any rule or regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Trust Held
-------------------------------------------------------------------
in the United States. The Bank may employ agents of its own selection in the
--------------------
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without
limiting the foregoing, certain duties of the Bank hereunder may be performed
by one or more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Trust, provided that any such
subcustodian meets at least the minimum qualifications required by Section
17(f)(1) of the 1940 Act to act as a custodian of the Trust's assets with
respect to property of the Trust held in the United States. The Bank shall have
no liability to the Trust or any other person by reason of any act or omission
of any such subcustodian and the Trust shall indemnify the Bank and hold it
harmless from and against any and all actions, suits and claims, arising
directly or indirectly
15
out of the performance of any subcustodian. Upon request of the Bank, the Trust
shall assume the entire defense of any action, suit, or claim subject to the
foregoing indemnity. The Trust shall pay all fees and expenses of any
subcustodian as agreed to in writing by the Trust.
14.3 Insurance. The Bank shall use the same care with respect to the
---------
safekeeping of Portfolio Securities and cash of the Trust held by it as it uses
in respect of its own similar property, including the maintenance of fidelity
bond insurance. The Bank intends to maintain fidelity bond insurance at all
times during the term of the Agreement. Upon reasonable request, the Bank will
provide a description of the Bank's safeguards and procedures including
specific insurance policy information.
14.4 Fees and Expenses of the Bank. The Adviser will pay or reimburse the
-----------------------------
Bank from time to time for any transfer taxes payable upon transfer of
Portfolio Securities made hereunder, and for all necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or expense
to the Bank as provided above. For the services rendered by the Bank hereunder,
the Adviser will pay to the Bank such compensation or fees at such rate and at
such times as shall be agreed upon in writing by the parties from time to time.
The Bank will also be entitled to reimbursement by the Adviser for all
reasonable expenses incurred in conjunction with termination of this Agreement.
14.5 Advances by the Bank. The Bank may, in its sole discretion, advance
--------------------
funds on behalf of the Trust to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for such
payments by the Trust. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of the Trust's account with the
Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank to the Trust payable on demand.
Such overdraft shall bear interest at the current rate charged by the Bank for
such loans unless the Trust shall provide the Bank with agreed upon
compensating balances. The Trust agrees that the Bank shall have a continuing
lien and security interest to the extent of any overdraft or indebtedness or to
the extent required by law, whichever is greater, in and to any property at any
time held by it for the Trust's benefit or in which the Trust has an interest
and which is then in the Bank's possession or control (or in the possession or
control of any third party acting on the Bank's behalf). The Trust authorizes
the Bank, in the Bank's sole discretion, at any time to charge any overdraft or
indebtedness, together with interest due thereon, against any balance of
account standing to the credit of the Trust on the Bank's books.
15. Limitation of Liability and Indemnification.
-------------------------------------------
15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Trust, the Adviser
or any third party, and the Trust and Adviser shall indemnify and hold the Bank
and the Indemnified Parties harmless from and against any and all loss, damage,
liability, actions, suits, claims, costs and expenses, including legal fees, (a
"Claim") arising as a result of any act or omission of the Bank or any
Indemnified Party under this Agreement, except for any Claim resulting from the
willful misconduct, bad faith or negligence of the Bank or any Indemnified
Party in the performance of its obligations and duties under this Agreement, or
by reason of the Bank's or any Indemnified Party's reckless disregard thereof.
Without limiting the foregoing, neither the Bank nor the Indemnified Parties
shall be liable for, and the Bank and the Indemnified Parties shall be
indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party in
good faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;
16
(b) Any act or omission of any subcustodian selected by or at the
direction of the Trust, except that the Bank will be liable as described in
paragraph 14.2 of this Agreement;
(c) Any Corporate Action, distribution or other event related to
Portfolio Securities which, at the direction of the Trust, have not been
registered in the name of the Bank or its nominee;
(d) Any Corporate Action requiring a Response for which the Bank
has not received Proper Instructions or obtained actual possession of all
necessary Portfolio Securities, consents or other materials by 5:00 p.m. on the
date specified as the Response Deadline;
(e) Any act or omission of any European Branch of a U.S. banking
institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
(f) Information relied on in good faith by the Bank and supplied by
any Authorized Person in connection with the calculation of (i) the net asset
value and public offering price of the shares of stock of the Trust or (ii) the
Return Calculation; or
(g) Any acts of God, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation or computers (hardware or software)
and computer facilities, the unavailability of energy sources and other similar
happenings or events.
15.2 The Bank will indemnify each of the Trust and the Adviser, and its
directors officers, employees and agents against and hold it and them harmless
from any and all losses, claims, damages, liabilities or expenses (including
legal fees and expenses) resulting from the willful misconduct, bad faith or
negligence of the Bank or any Indemnified Party in the performance of its
obligations and duties under this Agreement, or by reason of the Bank's or any
Indemnified Party's reckless disregard thereof.
15.3 Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank or the Indemnified Parties be liable to the Trust, the
Adviser or any third party for any special, consequential, or punitive damages
of any kind whatsoever in connection with this Agreement or any activities
hereunder.
16. Termination.
-----------
16.1 The term of this Agreement shall be three years commencing upon the
date hereof (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive one-year terms (each a "Renewal Term")
unless notice of non-renewal is delivered by the non-renewing party to the
other party no later than sixty (60) days prior to the expiration of the
Initial Term or any Renewal Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term (i) in the event the other party violates any
material provision of this Agreement or is unable to continue to fulfill its
obligation and duties under the Agreement; provided that a violating party
shall for its first material violation of this Agreement have the opportunity
to cure such violation within forty-five (45) days of receipt of written notice
from the non-violating party of such violation, or (ii) after the second
anniversary hereof, upon ninety (90) days written notice to the other party.
17
(b) Either party may terminate this Agreement during any Renewal
Term upon sixty (60) days written notice to the other party. Any termination
pursuant to this paragraph 16.1(b) shall be effective upon expiration of such
sixty (60) days, provided, however, that the effective date of such termination
may be postponed to a date not more than one hundred twenty (120) days after
delivery of the written notice: (i) at the request of the Bank, in order to
prepare for the transfer by the Bank of all of the assets of the Trust held
hereunder; or (ii) at the request of the Trust, in order to give the Trust an
opportunity to make suitable arrangements for a successor custodian.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of
all cash and the delivery of all Portfolio Securities duly endorsed and all
records maintained under Section 11 to the successor custodian when appointed
by the Trust. The obligation of the Bank to deliver and transfer over the
assets of the Trust held by it directly to such successor custodian will
commence as soon as such successor is appointed and will continue until
completed as aforesaid. If the Trust does not select a successor custodian
within sixty (60) days from the date of delivery of notice of termination, the
Bank may, subject to the provisions of subsection 16.3, deliver the Portfolio
Securities and cash of the Trust held by the Bank to a bank or trust company of
the Bank's own selection, with approval by the Trust, which meets the
requirements of Section 17(f)(1) of the 1940 Act and has a reported capital,
surplus and undivided profits aggregating not less than $2,000,000, to be held
as the property of the Trust under terms similar to those on which they were
held by the Bank, whereupon such bank or trust company so selected by the Bank
will become the successor custodian of such assets of the Trust with the same
effect as though selected by the Board. Thereafter, the Bank shall be released
from any and all obligations under this Agreement.
16.3 Prior to the expiration of sixty (60) days after notice of
termination has been given, the Trust may furnish the Bank with an order of the
Trust advising that a successor custodian cannot be found willing and able to
act upon reasonable and customary terms and that there has been submitted to
the shareholders of the Trust the question of whether the Trust will be
liquidated or will function without a custodian for the assets of the Trust
held by the Bank. In that event the Bank will deliver the Portfolio Securities
and cash of the Trust held by it, subject as aforesaid, in accordance with one
of such alternatives which may be approved by the requisite vote of
shareholders, upon receipt by the Bank of a copy of the minutes of the meeting
of shareholders at which action was taken, certified by the Trust's Secretary
and an opinion of counsel to the Trust in form and content satisfactory to the
Bank. Thereafter, the Bank shall be released from any and all obligations under
this Agreement.
16.4 The party initiating a termination of this Agreement shall reimburse
the other party for any reasonable expenses incurred by the other party in
connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Trust may,
upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as custodian.
17. Year 2000 Readiness Disclosure. The Bank represents that the
------------------------------
occurrence in or use by the Bank's own proprietary internal systems (the
"Systems") of dates on or after January 1, 2000 (the "Millennial Dates") will
not adversely affect the performance of the Systems with respect to date
dependent data, computations, output or other functions (including, without
limitation, calculating, computing and sequencing) and that the Systems will
create, store and generate output data related to or including Millennial Dates
without errors or omissions ("Year 2000 Compliance"). The Bank shall promptly
notify the Trust of any lack of Year 2000 Compliance of which it becomes aware
that impact the Bank's services hereunder. The parties to this Agreement
acknowledge that the Bank can make no certification as to the Year 2000
Compliance of third-party systems utilized by the Bank in its day to day
operations or with which the Systems interact or communicate, from which the
Systems receive data or to which the Systems send data. The parties further
acknowledge that while the Bank has contacted such third-party providers
regarding Year 2000 Compliance and will use reasonable efforts to monitor the
status of such third-party providers' Year 2000 Compliance, failure by such
third-party providers to achieve timely Year 2000 Compliance could adversely
affect the Bank's performance of its obligations hereunder. The Bank shall
promptly notify the Trust of any lack of Year 2000 Compliance of any
third-party provider of which it becomes aware that impact the Bank's services
hereunder.
18
18. Confidentiality. Both parties hereto agree than any non-public
---------------
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in
addition to all other remedies at law or in equity to an injunction or
injunctions without bond or other security to prevent breaches of this
provision.
19. Notices. Any notice or other instrument in writing authorized or
-------
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Trust to:
X.xxx Funds
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Story
Facsimile: (000) 000-0000
With a copy to: Xxxxx X. Hearth, Paul, Hastings,
Xxxxxxxx & Xxxxxx LLP
Facsimile: (000) 000-0000
(b) In the case of notices sent to the Adviser to:
X.xxx Asset Management, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Story
Facsimile: (000) 000-0000
With a copy to: Xxxxx X. Hearth, Paul, Hastings,
Xxxxxxxx & Xxxxxx LLP
Facsimile: (000) 000-0000
(c) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Director - Client Management
Facsimile: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxx, Assistant General
Counsel
Facsimile: (000) 000-0000
19
or at such other place as such party may from time to time
designate in writing.
20. Amendments. This Agreement may not be altered or amended, except by
----------
an instrument in writing, executed by both parties.
21. Parties. This Agreement will be binding upon and shall inure to the
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benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Board; and provided
further that termination proceedings pursuant to Section 16 hereof will not be
deemed to be an assignment within the meaning of this provision.
22. Governing Law. This Agreement and all performance hereunder will be
-------------
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
23. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
24. Entire Agreement. This Agreement, together with its Appendices,
----------------
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
25. Limitation of Liability. The Bank agrees that the obligations
-----------------------
assumed by the Trust hereunder shall be limited in all cases to the assets of
the Trust and that the Bank shall not seek satisfaction of any such obligation
from the officers, agents, employees, trustees, or shareholders of the Trust.
26. Several Obligations of the Funds. This Agreement is an agreement
--------------------------------
entered into between the Bank and the Trust with respect to each Fund. With
respect to any obligation of the Trust on behalf of any Fund arising out of
this Agreement, the Bank shall look for payment or satisfaction of such
obligation solely to the assets of the Fund to which such obligation relates as
though the Bank had separately contracted with the Trust by separate written
instrument with respect to each Fund.
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
X.XXX FUNDS
By: /s/ Xxxx X. Story
--------------------------
Name: Xxxx X. Story
Title: Executive Vice President
X.XXX ASSET MANAGEMENT, INC.
By: /s/ Xxxx X. Story
--------------------------
Name: Xxxx X. Story
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Director
21
Appendices
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Appendix A...................................... Funds
Appendix B...................................... Fee Schedule
Appendix C...................................... Additional Services
22
Appendix A
FUNDS OF X.XXX FUNDS
Fund Effective Date
---- --------------
1) X.xxx Premier S&P 500 Fund November 17, 1999
2) X.xxx U.S.A. Bond Fund November 17, 1999
3) X.xxx U.S.A. Money Market Fund November 17, 1999
4) X.xxx International Index Fund March 27, 2000
X.XXX FUNDS
By: /s/ Xxxx X. Story
--------------------------
Name: Xxxx X. Story
Title: Executive Vice President
X.XXX ASSET MANAGEMENT, INC.
By: /s/ Xxxx X. Story
--------------------------
Name: Xxxx X. Story
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Director
00
Xxxxxxxx X
X.XXX FUNDS
ANNUAL FEE SCHEDULE
NOVEMBER 17, 1999
A. TRUST ACCOUNTING, CUSTODY AND CALCULATION OF N.A.V.
---------------------------------------------------
The Annual Fee for Trust Accounting, Custody and Calculation of N.A.V. for
three Feeder Trusts will be charged according to the following schedule. The
following schedule is exclusive of transaction costs and out-of-pocket
expenses.
ANNUAL
------
FEE
---
ANNUAL FEE PER FEEDER FUND
$12,000
For each additional class added beyond the first one class there will be an
annual fee of $6,000 for the above services.
B. TRUST ADMINISTRATION, COMPLIANCE, FINANCIAL STATEMENT PREPARATION, LEGAL
------------------------------------------------------------------------
ADMINISTRATION, AND BLUE SKY.
----------------------------
The Annual Fee for Trust Administration, Financial Statement Preparation,
Legal Administration, and Blue Sky for three Feeder Trusts will be charged
according to the following schedule.
ANNUAL
------
FEE
---
ANNUAL FEE PER FEEDER FUND
$50,000
For each additional class added beyond the first one class there will be an
annual fee of $10,000 for the above services.
C. MISCELLANEOUS
1. Out-of-Pocket
-------------
For purposes of this Agreement, out-of-pocket charges consist of:
- Telephone
- Ad Hoc Reporting
24
- Third Party Review
- Forms and Supplies
- Printing/Postage/Delivery
- Systems Development/Reports/Transmissions
- Equipment Rental
- Legal costs associated with substantial alterations of IBT's
standard agreements
2. Balance Credits
---------------
We allow use of balance credit against fees (excluding out-of-pocket
charges) for collected fund balances arising out of the custody
relationship. The monthly earnings allowance is equal to 75% of the 90-day
T-xxxx rate.
3. Systems
-------
The details of any systems work required to service this fund will be
determined after a thorough business analysis. All systems work, including
creating customized reports and establishing systems/communications
interfaces with X.Xxx, other providers, etc., will be billed on a time and
materials basis.
4. Billing and Payment
-------------------
The above fees will be charged against the Funds' custodian checking account
five business days after the invoice is mailed to the fund.
All charges will be billed monthly. The fee schedule will be effective upon
start-up of the Funds.
25
