PLEDGE AGREEMENT
Agreement dated as of September 25, 1997 between Xxxxx Xxxxxx Incorporated
("Broker") The Prudential Series Fund, Inc., ("Customer" or the "Fund") "), a
registered investment company pursuant to the Investment Company Act of 1940, on
behalf of each of the individuals portfolios set forth on Schedule A annexed
hereto, and Investors Fiduciary Trust Company ("IFTCM) ("Bank") (Customer,
Broker and Bank are hereinafter collectively known as the "Parties").
WHEREAS, by a Customer Agreement (the "Customer Agreement") dated as of
September 25, 1997, Customer has opened a trading account ("Trading Account")
with Broker, a registered Futures Commission Merchant, for the purpose of
trading futures contracts ("Futures Contracts") and options on Futures Contracts
("Options") traded on domestic and foreign exchanges (such Options and Futures
Contracts being referred to individually as a "Contract" and collectively as
"Contracts"), to take positions for the Fund; and
WHEREAS, the rules and regulations of the Chicago Mercantile Exchange, the
Chicago Board of Trade, the Commodity Futures Trading Commission and such other
domestic and foreign exchanges on which Broker may effect, or cause to be
effected, Contract transactions for Customer (each an "Exchange"; together the
"Exchanges"), may require Customer to deposit with Broker certain collateral;
and
WHEREAS, Prudential Mutual Fund Management, LLC ("PMF"), an indirect,
wholly-owned subsidiary of The Prudential Insurance Company of America
("Prudential"), the investment manager of the Fund pursuant to the Management
Agreement between the Fund and PMF, has entered into a Sub-Advisory Agreement
with The Prudential Investment Corporation ("PlC"), a wholly-owned subsidiary of
Prudential, pursuant to which PlC furnishes investment advisory services to the
Fund; and
WHEREAS, Bank is a portfolio securities custodian for Customer pursuant to
the Custodian Agreement between Customer and Bank ("Custodian Agreement"); and
WHEREAS, Broker understands that Customer and Bank hereby agree that Bank
will open and maintain such custody account on behalf of the portfolios of
Customer set forth on Schedule A or accounts as Customer in writing may direct,
such accounts to be subject to the terms of this Pledge Agreement among the
Parties ("Pledge Account").
NOW, THEREFORE, it is agreed as follows:
1. As used herein the following terms shall have the following meanings:
"Initial Margin" means the minimum margin required by Broker, in its
sole discretion to enter into a Futures Contract or to sell Options as
required by
any Exchange on which transactions are effected by Broker as broker
for Customer or by Broker, in its sole discretion.
"Instructions from Broker" means a request, direction or certification
in writing signed in the name of Broker by a person authorized to sign
for Broker as certified in writing to Bank by an officer of Broker.
Such instructions shall be delivered by hand or transmitted via
facsimile machine.
"Instructions from Customer" means a request, direction or
certification in writing signed in the name of Customer by a person
authorized to sign for Customer and hand-delivered to Bank or
transmitted to it by a facsimile sending device except that
instructions to transfer cash or U.S. Government securities to or from
each Pledge Account may be given by telephone and thereafter confirmed
in writing.
"Notice by Bank to Broker" means notice by Bank via telephone or by a
facsimile sending device, to any person designated by Broker in
writing as eligible to receive such notice.
"Notice by Broker to Customer" or "Notice by Bank to Customer" means
notice via telephone or in writing delivered to Customer or
transmitted to it by a facsimile sending device by Broker or by Bank,
respectively, to any person designated by Customer in writing as
eligible to receive such notice. When notice is given pursuant to
paragraphs 10 (B), (C) and (D) hereof, telephone notice must be
followed by a hand-delivered notice or facsimile notice on the same
day that telephone notice is given.
"Notice by Broker to Bank" means notice by Broker via telephone or in
writing delivered to Bank or transmitted to it by a facsimile sending
device, to the individual designated by Bank in Section 15 hereof or
such other officer of Bank as shall be communicated to the other
parties in writing.
"One Business Day" means a period commencing at the time the required
notice has been given on a day on which Customer, Bank and Broker are
open for business and concluding at the same time on the next
following day that Customer, Broker and Bank are open for business.
2. Customer will give Instructions from Customer to open and maintain
Pledge Accounts, as the same may be amended from time to time, for
Broker as pledgee of Customer with respect to the Trading Account. The
Pledge Account shall be entitled "Xxxxx Xxxxxx Incorporated Customer
Segregated Account ________ for the benefit of The Prudential Series
Fund, Inc. with respect to Contracts traded on domestic exchanges, and
"Xxxxx Xxxxxx Incorporated Customer 30.7 Secured Account, for the
benefit of the Prudential Series Fund, Inc." with respect to Contracts
traded on foreign
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exchanges. In connection with such Contracts traded on any foreign
board of trade, Customer acknowledges that it has received,
understands and agrees to the terms of the CFTC Subordination
Agreement separately furnished by Broker to Customer.
Each Pledge Account is a segregated account or a secured amount
account, as applicable, within the meaning of the Commodity Exchange
Act, as amended, and regulations promulgated by the Commodity Futures
Trading Commission pursuant thereto ("Regulations"), and securities
and other property deposited therein will be held by Bank in
accordance therewith. For purposes of Section 1.20 and Section 30.7 of
the Regulations, as applicable Bank acknowledges that the funds and
securities deposited in each Pledge Account are those of "a commodity
or options" Customer of Broker. In connection with trading Contracts
on any foreign board of trade, Customer acknowledges that it has
received, understands and agrees to the terms of the Subordination
Agreement pursuant to the Regulations separately furnished by Broker
to Customer.
3. Customer shall deposit in each Pledge Account cash, U.S. Government
securities, any combination thereof, or with the consent of Broker
(not to be unreasonably withheld), other securities which are
acceptable under the rules of the relevant Exchange (collectively,
"Collateral") in the amount of Initial Margin required with respect to
any Contract for the Trading Account for which the Pledge Account is
maintained. In the case of Initial Margin in connection with Options
written by Customer, such margin shall be increased or reduced daily
in accordance with the requirements of the Exchange on which the
Options were sold. Such Collateral shall be maintained in the Pledge
Account until termination or satisfaction of the related Futures
Contract or Option. Customer may deposit, or maintain on deposit,
Collateral in the Pledge Account in excess of Initial Margin or
Variation Margin requirements ("Excess Funds"). Customer shall bear
all risk and cost in respect of the conversion of currencies incident
to transactions effected in a foreign currency on behalf of Customer,
including any loss arising as result of a fluctuation in the relevant
exchange rate. In determining whether Collateral is sufficient to
satisfy Initial Margin requirements, U.S. Government securities will
be valued at market value ("Value") less any applicable regulatory
haircuts.
4. Collateral held in the Pledge Account:
(I) will be held by Bank subject to the terms and conditions of the
Custodian Agreement and this Agreement. This Agreement shall be
controlling with respect to the Pledge Account in the event of
conflicting provisions;
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(ii) may be released, transferred or sold only in accordance with the
terms of this Agreement; and
(iii) except as otherwise provided herein, shall not be made available
to Broker or to any person claiming through Broker, including
creditors of Broker.
Customer hereby grants to Broker a continuing security interest in the
Collateral and the proceeds thereof subject to the terms and
conditions of this Agreement, which security interest will terminate
at the release of the Collateral by Broker as provided herein. The
Collateral shall at all times remain the property of Customer subject
only to the interest and rights therein of Broker as pledgee and
secured party thereof as provided in this Agreement.
5. Other than pursuant to paragraph 10 hereof, Collateral shall only be
transferred or released from any Pledge Account upon both (x)
Instructions from Broker and (y) Instructions from Customer.
6. Customer may substitute as Collateral U.S. Government securities or
cash of equal or greater Value. Upon request from Customer identifying
Collateral to be substituted and consent thereto by Broker, Broker
agrees to give Instructions from Broker to Bank to release from a
Pledge Account cash or U.S. Government securities of an equal Value,
or such lesser amount as may be directed by Customer, only upon and
after receipt of substitute Collateral.
7. Broker shall promptly notify Customer of the amount of any Excess
Funds in a Pledge Account. Upon request of Customer and with the
consent of Broker, Broker shall give Instructions from Broker to Bank
to release cash or U.S. Government securities selected by Customer,
the Value of which in the aggregate does not exceed the amount of any
such Excess Funds.
8. Interest on U.S. Government securities held in any Pledge Account will
be credited by Bank in Federal funds to the Fund's custody account
(but not to the Pledge Account) on the date that such funds are
received. Amounts due on U.S. Government securities which mature or
are redeemed will be credited to the Pledge Account in Federal funds
on the date funds are received.
9. Bank shall promptly give Notice by Bank to Customer, and Notice by
Bank to Broker, via facsimile sending device, of each transfer into or
out of a Pledge Account and shall mail to both written confirmation
thereof.
10. Broker shall have access to the Collateral only in accordance with the
following:
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(A) Unless a shorter notice period is required by the Exchange on
which the futures positions are carried, or Broker specifies a
shorter period in the event Broker considers it necessary, in its
sole and absolute discretion, for its protection, if Notice by
Broker to Customer is given that additional margin is required
due to variation in the value of one or more outstanding Futures
Contracts purchased or sold for Customer or assigned to Customer
as a result of exercise of Options written by Customer
("Variation Margin") prior to 11:30 a.m. New York time on a day
on which Customer is open for business, which Variation Margin
shall first have been satisfied from any amounts currently
credited to Customer's Trading Account with Broker in connection
with which the Variation Margin is required, Customer shall
transfer to Broker such Variation Margin not later than the end
of the Business Day on which such notice was given. Unless a
shorter period of time is required or specified as referenced
above, if Notice by Broker to Customers is given of the
requirement for Variation Margin subsequent to 11:30 a.m. but
prior to 4:00 p.m. New York time, Customer shall cause such
Variation Margin to be transferred to Broker not later than 11:30
a.m. New York time the next succeeding Business Day. Notice by
Broker to Customer of the receipt of Variation Margin shall be
given promptly in writing.
(B) If Broker receives an intra-day Variation Margin call from any
Exchange on which transactions were effected by Broker as Broker
for Customer, Broker will immediately make the determination set
forth in paragraph (A) above, and will promptly notify Customer
of the need for additional Variation Margin. In such event,
Customer shall immediately provide such additional Variation
Margin to Broker.
(C) If Broker has not received the requested Variation Margin within
the time period specified in paragraph (A) above, then Notice by
Broker to Customer of the failure to receive the Variation Margin
shall be given immediately.
(D) If Broker does not receive the Variation Margin within the time
period specified in paragraph (A) above, then Broker may give (i)
Notice by Broker to Bank of Customer's failure to provide
Variation Margin and the amount of Variation Margin required, and
(ii) Notice by Broker to Customer that such Notice has been given
to Bank. Immediately upon receipt of Notice by Broker to
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Bank, Bank shall give Notice by Bank to Customer of its receipt
of such Notice by Broker.
(E) If Customer has failed to transfer the required Variation Margin
to Broker within the time period specified in paragraph (A)
above, Broker may give Instructions from Broker to Bank to
transfer the Collateral to Broker and Broker may sell such
Collateral from the Pledge Account relating to the Trading
Account in which the Variation Margin is required as necessary to
provide for payment to Broker of the amount of Variation Margin
that Broker shall have specified in the Notice in accordance with
the provisions of the Customer Agreement With respect to
Collateral in the form of cash, Broker may give Instructions from
Broker to Bank to transfer cash immediately in the amount of the
Variation Margin that Broker shall have specified in such Notice
from such Pledge Account to the account of Broker. Bank shall
immediately give Notice by Bank to Customer of its receipt of
such Instruction from Broker to Bank and, upon taking any action
pursuant to such Instructions, shall immediately give Notice by
Bank to Customer of such actions.
(F) Broker shall transmit any proceeds from the sale of securities in
excess of the amount specified in the Notice by Broker to Bank
for deposit to the Customer's Custody Account with Bank. Broker
shall give consideration to any timely request by Customer with
respect to particular securities to be transferred or sold.
11. Neither Broker nor any person claiming through Broker shall have
access to Collateral in any Pledge Accounts established and maintained
by Customer other than the Pledge Accounts established and maintained
pursuant to this Agreement and only in accordance with the provisions
of this Agreement subject to Commodity Exchange Act and the
Regulations.
12. Bank's duties and responsibilities are as set forth in this Agreement.
Bank shall act only upon receipt of Instructions from Broker regarding
release of Collateral. Bank shall not be liable or responsible for
anything done, or omitted to be done by it in good faith and in the
absence of negligence or willful misconduct and may rely and shall be
protected in acting upon any notice, instruction or other
communication received in accordance with the terms of this Agreement
which it reasonably believes to be genuine and authorized. As between
Customer and Bank, the terms of the Custodian Agreement shall apply
with respect to any reasonable losses or liabilities of such parties
arising out of matters covered by this Agreement. As between
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Bank and Broker, Broker shall indemnify and hold Bank harmless with
regard to any reasonable losses or liabilities of Bank (including
counsel fees) imposed on or incurred by Bank (other than as a result
of Bank's or Customer's negligence or willful misconduct) arising out
of any action or omission of Bank solely in accordance with any notice
or instruction of Broker under this Agreement. Bank may hold the
securities in the Pledge Accounts in bearer, nominee, book entry, or
other form and in any depository or clearing corporation, with or
without indicating that the securities are held hereunder~ provided,
however, that all securities held in the Pledge Accounts shall be
identified on Bank records as subject to this Agreement and shall be
in a form that permits transfer without additional authorization or
consent of the Customer.
13. Any and all reasonable expenses of establishing, maintaining1 or
terminating the Pledge Account, including without limitation any and
all reasonable expenses incurred by Bank in connection with the Pledge
Account, shall be borne by Broker, provided, however, that such
expenses do not exceed the sum of one thousand dollars per annum. Any
amounts in excess of one thousand dollars per annum shall be borne by
Customer.
14. No amendment of this Agreement shall be effective unless in writing
and signed by an officer of Broker, either the Treasurer or an
Assistant Treasurer of Customer and a Vice President of Bank.
15. Written communications hereunder shall be transmitted by a facsimile
sending device, except as otherwise required hereunder, or
hand-delivered or mailed first class, postage prepaid, except that
written notice of termination shall be sent by certified mail,
addressed:
(a) if to Bank, to:
Investors Fiduciary Trust Company
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx Both
(b) if to Customer, to:
The Prudential Series Fund, Inc.
00 XXX Xxxxxxx, 0Xx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Associate Manager Operations
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(c) if to Broker, to:
Xxxxx Xxxxxx Incorporated
000 Xxxx Xxxxxxx, Xxxxx 00000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
16. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto.
17. My of the parties hereto may terminate this Agreement upon 30 days'
written Notice to the other parties hereto; provided, however, that
all obligations to Broker arising from this Agreement have been
satisfied and that Collateral which has not been released by Broker at
or prior to the time of termination shall be transferred to a
substitute custodian designated by Customer and acceptable to Broker,
subject to any obligation owed by Customer to Broker.
18. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by the laws of the
State of New York and shall be binding on Broker, Bank and Customer
and their respective successors and assigns.
19. It is understood that Bank has no responsibility (i) requiring any
cash or securities to be delivered to it or (ii) for determining
whether the value of Collateral is sufficient to satisfy any margin
requirements of any Exchange.
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20. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when
so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
DATE: PRUDENTIAL INVESTMENT CORPORATION, on
behalf of THE PRUDENTIAL SERIES FUND, INC.
By: XXXX XXXXXX
---------------------------------
TITLE: Senior Managing Director
DATE: XXXXX XXXXXX INCORPORATED
By: ILLEGIBLE
---------------------------------
TITLE: Senior Vice President
DATE: INVESTORS FIDUCIARY TRUST COMPANY
By: XXXX XXXXX
---------------------------------
TITLE: Vice President
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SCHEDULE A
- Conservative Balanced Portfolio
- Flexible Managed Portfolio
- Stock Index Portfolio
- Small Capitalization Stock Portfolio
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