Prime Brokerage Services
Special Custody Account Agreement
(3 Party- Short Sales Only)
SPECIAL CUSTODY ACCOUNT AGREEMENT
(Short Sales)
AGREEMENT, dated as of August 24, 2000, by and among State Street Bank and
Trust Company, in its capacity as custodian hereunder ("Bank"), INVESCO
Advantage Series Funds, Inc., on behalf of its portfolio, INVESCO Advantage Fund
("Customer"), and Xxxxxx Xxxxxxx & Co. Incorporated ("Broker").
WHEREAS, Broker is a securities broker-dealer registered with the
Securities and Exchange Commission and a clearing member of The Options Clearing
Corporation ("OCC") and is a member of several national securities exchanges;
and
WHEREAS, Customer desires from time to time to sell securities "short"
through Broker, such short sales being permitted by Customer's investment
policies, and for that purpose has opened one or more margin accounts with
Broker (each an "Account") and executed Broker's " Prime Broker Margin Account
Agreement" (the "Customer Agreement"); and
WHEREAS, to facilitate Customer's transactions through Broker, Customer
and Broker desire to establish procedures for the compliance by Broker with the
provisions of Regulation T of the Board of Governors of the Federal Reserve
System and with the provisions of Rule 431 of the New York Stock Exchange and
other applicable requirements and for compliance by Customer with Regulation X
of the Board of Governors of the Federal Reserve System and other requirements
("Margin Rules"); and
WHEREAS, Customer is a series of an investment company registered under
the Investment Company Act of 1940 ("1940 Act") and required by Section 17(f) of
the 1940 Act to place its securities and similar investments in the custody of
one or more institutions of the type specified in Section 17(f); and
WHEREAS, Bank, as custodian of certain assets of Customer under a
Custodian Contract (as defined herein), is prepared to act as custodian to hold
Collateral as defined below.
NOW, THEREFORE, be it agreed as follows:
1. As used herein, the following terms have the following meanings:
"Adequate Margin" shall mean such Eligible Collateral as is adequate in
Broker's judgment under the Margin Rules and the internal policies of Broker.
For purposes hereunder, Eligible Collateral shall be valued by Broker at
Broker's sole discretion.
"Advice from Broker" or "Advice" means a written notice signed by an sent
by an Authorized Representative of Broker (as defined below) to Customer and/or
Bank, as applicable, or transmitted by a facsimile sending device, except that
for any of the following purposes it shall mean notice by telephone to a person
designated by Customer or Bank, as appropriate in writing, as authorized to
receive such advice or, in the event that no such person is available, to any
officer of Customer or Bank and confirmed promptly in writing thereafter: (i)
for initial or additional Collateral; (ii) that Customer has defaulted pursuant
to paragraph 9(a) hereof. With respect to any short sale or covering purchase
transaction, the Advice from Broker shall mean a standard written confirmation
in use by Broker and sent or transmitted to Customer and/or Bank. With respect
to substitutions or releases of Collateral, Advice from Broker means a written
notice signed by an Authorized Representative of Broker and sent or transmitted
to Customer and/or Bank. An officer of Broker will certify to Bank on Appendix A
attached hereto the names and signatures of those employees who are authorized
to sign Advices from Broker (each, an "Authorized Representative of 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.
"Closing Transaction" is a transaction in which Customer purchases
securities which have been sold short.
"Collateral" means all Eligible Collateral in the Special Custody Account.
"Custodian Contract" means the Custodian Contract, as amended between the
Bank and the Customer.
"Eligible Collateral" means U.S. cash, U.S. government securities
maintained in the Treasury/Reserve Automated Debt Entry System ("TRADES") or
other margin eligible U.S. securities acceptable to Broker.
"Insolvency" means that (A) an order, judgment or decree has been entered
under the bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law (herein called
the "Bankruptcy Law") of any jurisdiction adjudicating Customer insolvent; or
(B) Customer has petitioned or applied to any tribunal for, or consented to the
appointment of, or taking possession by, a trustee, receiver, liquidator or
similar official, of Customer, or commenced a voluntary case under the
Bankruptcy Law of the United States or any proceedings relating to Customer
under the Bankruptcy Law of any other jurisdiction, whether now or hereinafter
in effect; or (C) any such petition or application has been filed, or any such
proceeding has commenced, against Customer and Customer by any act has indicated
its approval thereof, consent thereto or acquiescence therein, or an order for
relief has been entered in an involuntary case under the Bankruptcy Law of the
United States, as now or hereinafter constituted, or an order, judgment or
decree has been entered appointing any such trustee, receiver, liquidator or
similar official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 30 days.
"Instructions from Customer" or "Instructions" means a request, direction
or certification in writing signed by Customer and delivered to Bank and/or
Broker or transmitted by a facsimile sending device and which is reasonably
believed by Bank and/or Broker in good faith to be signed by a person authorized
to give Instructions on behalf of Customer. An authorized agent of Customer will
certify to Bank and Broker the names and signatures of those persons authorized
to Instruct Bank and/or Broker, which certification may be amended from time to
time. When used herein, the term "Instruct" shall mean the act of sending an
Instruction from Customer.
2. From time to time, Customer may place orders with Broker for the short
sale of securities. Prior to the acceptance of such short sale orders Broker
will notify Customer of Broker's ability to borrow such securities or other
properties and acceptance of short sale orders will be contingent upon same.
3. Bank shall open an account on its books and records entitled "Xxxxxx
Xxxxxxx & Co. Incorporated as Short Sales Pledgee of INVESCO Advantage Fund"
(referred to herein as "Special Custody Account"), which shall be a sub-account
of Customer's custody account with the Bank. Collateral shall be released only
in accordance with this Agreement or as required by applicable law. Bank agrees
to release Collateral to Customer from the pledge hereunder only upon receipt of
Advice from Broker. Customer can substitute or exchange the cash, securities or
similar property in the Special Custody Account only after Customer notifies
Broker of the contemplated substitution or exchange and Broker Advises Bank that
such substitution or exchange is acceptable. Customer hereby grants a continuing
security interest to Broker in the Collateral and the proceeds thereof to secure
its obligations to Broker under the Margin Agreement and this Agreement. Bank
shall have no responsibility for the validity or enforceability of such Security
Interest beyond the obligations specified in this Agreement. The parties hereto
agree that all Eligible Collateral except cash held in or credited to the
Special Custody Account will be treated as financial assets under Article 8 of
the Uniform Commercial Code as in effect in the State of New York (the "UCC").
The parties hereto further agree that the securities intermediary's
jurisdiction, within the meaning of Section 8-110(e) of the UCC, in respect of
the Special Custody Account and the Collateral, is the State of New York and
agree that none of them has or will enter into any agreement to the contrary
except that the parties acknowledge that the Custodian Contract is governed by
Massachusetts law. Anything in this Agreement to the contrary notwithstanding,
Bank hereby agrees to comply with entitlement orders and other instructions of
Broker with respect to the Special Custody Account and any Collateral without
further consent of Customer. Customer hereby consents to such agreement.
4. Customer agrees to instruct Bank in Instructions from Customer that
Eligible Collateral specified by Customer and at least equal in value to what
Broker shall initially and from time to time advise Customer in an Advice from
Broker is necessary to constitute Adequate Margin are to be identified on Bank's
books and records as pledged to Broker as Collateral. Bank may, in its
discretion, choose not to act upon Instructions from Customer if any advances
under the Custodian Contract are outstanding at such time. If Bank chooses not
to act upon Instructions from Customer, Bank shall promptly notify Customer of
Bank's intention not to act on such instructions. Broker shall have all rights
and remedies provided hereunder and under the Prime Broker Margin Agreement.
Such Eligible Collateral and any other Collateral (i) will be held by Bank in,
and credited by Bank to, the Special Custody Account, subject to the terms and
conditions of this Agreement; (ii) may be released only in accordance with the
terms of this Agreement; and (iii) except as required to be released hereunder
to Broker, shall not be made available to Broker or to any other person claiming
through Broker, including creditors of Broker. Bank will hold the Collateral in
the Special Custody Account subject to the security interest therein of Broker
as the pledgee thereof in accordance with the terms of this Agreement. Such
security interest will terminate at such time as Collateral is released as
provided herein. It is understood that Broker will be responsible for valuing
the Collateral, and the Bank at no time has any responsibility for determining a
valuation or the adequacy of the collateral except as provided in the Custodian
Contract.
Interest, dividends or proceeds attributable to Collateral shall be
credited to the Customer's custody account with Bank.
Bank will confirm in writing to Broker all pledges, deliveries, releases
or substitutions of Collateral. Bank will also advise Broker upon reasonable
request (and in any event monthly) of the kind and amount of Collateral pledged
to Broker and held in the Special Custody Account. Bank will also advise Broker
daily by 3:00 p.m. New York time of the amount of the Collateral pledged to
Broker as of the close of business of the prior business day by facsimile to
(000) 000-0000 and once a month to the Broker's address. Upon the request of
Customer, Broker shall Advise Bank and Customer of any excess of Collateral in
the Special Custody Account. Upon Customer's request, Broker shall Advise Bank
to transfer such excess Collateral out of the Special Custody Account to an
account designated by Customer. This Agreement will not affect the duties of the
Custodian under the Custodian Contract except as specifically provided herein.
5. Customer represents and warrants to Broker that securities included at
any time in the Collateral shall be in good deliverable form (or Bank shall have
the unrestricted power to put such securities into good deliverable form) in
accordance with the requirements of such exchanges as may be the primary market
or markets for such securities. Securities Collateral may be held in bearer,
nominee, book-entry or other form at Depository Trust Company ("DTC") or other
book-entry depository system in the account of Bank, with or without indicating
that the securities are held hereunder provided that, all securities held in the
Special Custody Account shall be identified on Bank's records as subject to this
Agreement and shall be in a form that permits transfer without additional
authorization or consent of the Customer, except U.S. Treasury securities shall
be held in a TRADES Participant's Securities Account of the Bank at a Federal
Reserve Bank. The Bank represents that Collateral will not be subject to any
lien, charge, security interest or other right or claim of the Bank or any
person claiming through the Bank. Bank hereby waives and releases all liens,
encumbrances, claims and rights of setoff that it may now or hereafter have
against the Special Custody Account or any Collateral and agrees that it will
not assert any such lien, encumbrance, claim or right against the Special
Custody Account or any Collateral except for a lien for its fees, expenses and
advances in connection herewith or under the Custodian Contract, which shall be
expressly subordinated in right of payment to the security interest of Broker
granted herein. Bank represents and warrants that it has not, and agrees that it
will not, agree to comply with entitlement orders concerning the Special Custody
Account or any Collateral that are originated by any person other than Broker.
6. Bank will maintain accounts and records for the Collateral in the
Special Custody Account separate from the accounts and records for other
property of Customer held by Bank and other property in which Broker has an
interest.
7. Customer agrees to maintain Adequate Margin at all times. Broker shall
initially, and from time to time, Advise Customer (in an Advice from Broker) of
the value of Eligible Collateral which is necessary to constitute Adequate
Margin. Broker shall, from time to time, compute the aggregate net credit or
debit balance on Customer's open short sales and Advise Customer by 11:00 a.m.
New York time of the amount of the net debit or credit, as the case may be. If a
net debit balance exists on such day, Customer will cause an amount of Eligible
Collateral equal to such net debit balance to be deposited as Collateral in the
Special Custody Account by the close of business on such day. Broker will pay
interest to Customer on credit balances as provided by a Financing and Fee
Schedule, dated August 14, 2000, which is incorporated herein by reference.
Balances will be appropriately adjusted to reflect each Closing Transaction.
8. 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.
9. (a) In the event of default by Customer of any obligation hereunder or
under the Customer Agreement, or in the event of Customer's Insolvency, Broker
may, after transmittal of an Advice from Broker to Customer specifying such
default or Insolvency and its intention to do so, and only if Customer continues
to be in default or Insolvent, sell and Advise Bank to deliver to Broker the
proceeds of such of the Collateral as in Broker's judgment is reasonably
necessary for the protection of its interest under this Agreement.
(b) Any sale of Collateral made pursuant to this paragraph 9 must be
made on the exchange or other market where such business is then usually
transacted. Such sale shall be made in a manner commercially reasonable for such
securities. Customer shall remain liable to Broker for any deficiency. Broker
shall notify Customer of any sale of Collateral and any deficiency remaining in
an Advice from Broker. If the proceeds of any such sale exceed the amount due to
Broker under this paragraph 9, the excess of the amount due to Broker shall
remain in the Special Custody Account as Collateral unless otherwise released or
withdrawn as provided herein.
10. Bank 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 Bank.
11. With respect to any losses or liabilities, Bank shall be protected in
acting or not acting pursuant to any Instructions, Advices or notices from
Customer or Broker believed by Bank in good faith to be genuine and authorized,
except in the case of Bank's bad faith or negligence. Bank's obligations shall
be limited to those expressly set forth in the Agreement, and Bank shall not be
required to perform any obligation hereunder that would be inconsistent with any
applicable law. If Bank shall cease to act as custodian to Customer, its
obligations hereunder shall end, and Customer shall ensure that any assets then
held in the Special Custody Account for Broker's benefit shall be held in
accordance with the terms hereof by a substitute custodian reasonably
satisfactory to Broker. Customer shall indemnify Bank and hold it harmless for
any losses, damages or expenses (except for those expenses incurred in the
ordinary course of Bank's business) incurred in connection with this Agreement,
unless the Bank shall have engaged in bad faith or negligence or breach of its
duties hereunder. In no event shall Bank be liable to Broker in connection with
this Agreement in the absence of its bad faith or negligence. As between Bank
and Broker, Broker shall indemnify and hold Bank harmless with regard to any
losses or liabilities of Bank (including reasonable counsel fees) imposed on or
incurred by Bank arising out of any action or omission of Bank in accordance
with any notice or instruction of Broker under this Agreement. In matters
concerning or relating to this Agreement, Bank in its capacity as Custodian of
the Special Custody Account hereunder 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 or X of the Board of
Governors of the Federal Reserve System, or with any rules or regulations of the
New York Stock Exchange or any other exchange or regulatory body whose rules may
be applicable to transactions contemplated by this Agreement other than those
applicable to Bank's obligations as custodian hereunder. The Bank shall not be
liable to any party for any acts or omissions of any party other than itself as
stated herein. The Bank shall not be responsible or liable for any losses
resulting from nationalization, expropriation, devaluation, seizure, or similar
action by any governmental authority, de facto or de jure; or enactment,
promulgation, imposition or enforcement by any such governmental authority of
currency restrictions, exchange controls, levies or other charges affecting the
property in the Special Custody Account; acts of war, terrorism, insurrection or
revolution; or acts of God; or any other similar event beyond the control of the
Bank or its agents. Bank shall not be liable for indirect special or
consequential damage even if advised of the possibility or likelihood thereof.
This Section shall survive the termination of this Agreement.
12. Neither Broker nor Bank shall be liable 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 or Bank 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 own, or Bank's own, as the case may be, bad
faith, negligence or willful misconduct.
13. No amendment of this Agreement shall be effective unless in writing
and signed by an authorized officer of each of the parties hereto.
14. This Agreement may be executed in one or more counterparts, all of
which together shall constitute but one and the same instrument.
15. It is agreed that, notwithstanding any language to the contrary in
Bank's form of confirmation, Bank holds the Collateral for Broker as pledgee and
secured party hereunder, not as escrow agent.
16. Customer represents and warrants that the Collateral will not be
subject to any other liens or encumbrances, other than to Broker in accordance
with the Margin Agreement and this Agreement.
17. Any of the parties hereto may terminate this Agreement upon 15 days
prior notice in writing to the other parties hereto; provided, however, that 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 rules of such national
securities exchanges of which Broker may be a member, as applicable.
18. Written communications hereunder shall be sent by facsimile
transmission or hand delivered as required herein, 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, addressed:
(a) If to Bank, to:
State Street Bank and Trust Company
Xxx Xxxxxxxx Xxxxx X0X
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) If to Customer, to:
INVESCO Funds Group, Inc.
0000 X. Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(c) If to Broker, to:
Xxxxxx Xxxxxxx & Co. Incorporated
Prime Brokerage Services
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xx.
Attention: Xxxx Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
19. This Agreement will be governed by the laws of the State of New York
without regard to its conflicts of law rules and to the extent not preempted by
ERISA. The Customer hereby irrevocably submits to the exclusive jurisdiction of
any New York State court or any United States District Court located in the
State of New York in any action or proceeding arising out of this Agreement and
hereby irrevocably waives any objection to the venue of any such action or
proceeding brought in any such court or any defense of an inconvenient forum.
20. The parties to this Agreement acknowledge and agree: that Customer is
a registered investment company organized in series form; that the assets and
liabilities of each series of the Customer are separate and distinct from the
assets and liabilities of each other series; that "INVESCO Advantage Fund", at
the time of entering into this Agreement, is the only series of Customer; that
this Agreement relates only to the series designated "INVESCO Advantage Fund";
and that no series other than INVESCO Advantage Fund shall be liable for any
loss, liability, debt, obligation, expense or judgment relating to INVESCO
Advantage Fund, whether arising under this Agreement or otherwise.
IN WITNESS WHEREOF, each of the parties to this Special Custody Account
Agreement has caused this instrument to be executed in its name by its duly
authorized representative as of the date first above written.
STATE STREET BANK AND TRUST COMPANY
AS BANK
By:/s/ Xxxxxx X. Xxxxx
-------------------
Xxxxxx X. Xxxxx
Vice Chairman
INVESCO ADVANTAGE SERIES FUNDS, INC., ON BEHALF OF ITS SERIES,
INVESCO ADVANTAGE FUND
AS CUSTOMER
By:/s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
Treasurer
XXXXXX XXXXXXX & CO. INCORPORATED
AS BROKER
By:/s/ Xxxxxxx Xxxxxxxxxx
----------------------
Xxxxxxx Xxxxxxxxxx
Managing Director
Appendix A
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AUTHORIZED PERSONS FOR XXXXXX XXXXXXX & CO. INCORPORATED
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Custodian is directed to accept and act upon Advice from Broker received
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from any one of the following persons at Xxxxxx Xxxxxxx & Co. Incorporated.
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NAME TELEPHONE/FAX NUMBER SIGNATURE
---- -------------------- ---------
1. Xxxxxxx Xxxxx 1. 000 000-0000 0. /s/ Xxxxxxx Xxxxx
-9516 fax -----------------
2. Xxxxxx Xxxx 2. 000 000-0000 0. /s/ Xxxxxx Xxxx
-9516 fax ---------------
3. Xxxxxx Xxxxxxx 3. 000 000-0000 0. /s/ Xxxxxx Xxxxxxx
-9516 fax ------------------
4. Xxxxx Xxxxx 4. 000 000-0000 0. /s/ Xxxxx Xxxxx
-9516 fax ---------------
5. Xxxxxxx Xxxxx 5. 000 000-0000 0. /s/ Xxxxxxx Xxxxx
-9516 fax -----------------
