PLEDGE AGREEMENT
Agreement dated as of September ___ 1997 between X.X. Xxxxxx Futures Inc.,
("Broker") The Prudential Series Fund, Inc., an investment company registered
under the Investment Company Act of 1940, on behalf of each of the individual
portfolios set forth on Schedule A annexed hereto (each individually a
"Customer" or the "Fund"), and Investors Fiduciary Trust Company ("IFTC")
("Bank") (Customer, Broker and Bank are hereinafter collectively known as the
"Parties").
WHEREAS, by a Customer Agreement (the "Customer Agreement") dated September
___, 1997, Customer has opened one or more trading accounts (each a "Trading
Account") with Broker, a registered Futures Commission Merchant, for the purpose
of trading financial futures contracts ("Futures Contracts") and options on
Futures Contracts ("Options") (Options and Futures Contracts are referred to
individually as a "Contract" and collectively as "Contracts); and
WHEREAS, the rules and regulations of the Chicago Mercantile Exchange, the
Chicago Board of Trade, the Commodity Futures Trading Commission and such other
exchanges or boards of trade 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, Customer, Broker and Bank have agreed that Bank will open and
maintain such third party custody accounts as Customer may direct (each a
"Pledge Account"), such accounts to be subject to the terms of this Agreement
and the Custody Agreement between Customer and Bank (the "Custody Agreement");
AND
NOW, THEREFORE, it is agreed as follows:
1. As used herein the following terms shall have the following meanings
(such meaning to be equally applicable to both the singular and plural
forms of the terms defined):
"Initial Margin" means the minimum margin required by an Exchange on
which a transaction is effected in order to purchase or sell a Futures
Contract or to sell an Option on such Exchange.
"Instructions from Broker" means a request, direction or certification
delivered or transmitted to Bank either orally or in writing by way of
telex, telegraph or similar facsimile sending device 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.
"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 to or from each Pledge account cash or
Government securities, or cash or securities denominated in a currency
other than US dollars will be given by telephone and thereafter
confirmed in writing.
"Notice by Broker to Customer" or "Notice by Bank to Customer" means
notice 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), telephone notice
must be followed by a hand-delivered notice or facsimile notice.
"Notice by Broker to Bank" means notice by Broker to any person
designated by Bank in writing as eligible to receive such notice, or,
in the event no such person is available, to any officer in the
Custody Administration Department of Bank.
"Business Day" means a day on which and at a time at which Customer,
Bank and Broker are all open for business.
"Variation Margin" means any additional margin required by any
Exchange on which any Contract transaction is effected by Broker for
Customer due to the variation in value of one or more outstanding
Futures Contracts purchased or sold or Options sold for Customer.
2. With respect to Contracts traded on any contract market designated by
the CFTC pursuant to Section 5 of the Commodity Exchange Act, as
amended ("CEA"), Customer hereby requests Bank to open and maintain,
and Bank hereby agrees to open and maintain a Pledge Account for
Broker as pledgee of Customer with respect to each Trading Account.
Each such Pledge Account shall be entitled "X.X. Xxxxxx Futures Inc.,
Customer Segregated 1.20 Account for the Benefit of The Prudential
Series Fund, Inc., on behalf of each of the portfolios identified in
the Pledge Agreement among X.X. Xxxxxx
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Futures, Inc., IFTC, and The Prudential Series Fund, Inc., on behalf
of each of the identified portfolios, dated as of September __, 1997.
With respect to Contracts traded on any foreign board of trade or
exchange, Customer hereby requests Bank to open and maintain, and Bank
hereby agrees to open and maintain, a Pledge Account for Broker as
pledgee of Customer with respect to each Trading Account. Each such
Pledge Account shall be entitled "X.X. Xxxxxx Futures Inc., Customer
Secured 30.7 Account for the Benefit of The Prudential Series Fund,
Inc., on behalf of each of the portfolios identified in the Pledge
Agreement among X.X. Xxxxxx Futures, Inc., IFTC, and The Prudential
Series Fund, Inc., on behalf of each of the identified portfolios,
dated as of September ____,1997.
Each Pledge Account is a segregated or secured (as applicable) account
within the meaning of the CEA, and regulations promulgated by the CFTC
pursuant thereto and all cash, securities and other property deposited
therein will be held by Bank in accordance therewith. Bank hereby
acknowledges that: (1) in the case of any property deposited in the
Customer Segregated Account, such property is that of a commodity or
options customer of Broker and is being held in accordance with the
CEA and the regulations of the CFTC thereunder-~ and (2) in the case
of any property deposited in the Customer Secured Account, such
property is being held for or on behalf of a foreign futures and
foreign options customer of Broker and is being held in accordance
with the regulations of the CFTC under the CEA.
3. Customer shall give instructions from Customer to Bank to hold in
the Pledge Account cash, U.S. Government securities, cash or
securities denominated in a foreign currency or any combination
thereof (collectively, "Collateral"), in the amount of Initial Margin
required with respect to any Contract for the Trading Account 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 give Instructions from Customer to Bank to hold Collateral in the
Pledge Account in excess of such requirements ("Excess Collateral").
In determining whether Collateral is sufficient to satisfy Initial
Margin requirements of any Exchange, U.S. Government securities will
be valued at 90% of current market value ("Value").
Customer may enter into a transaction in a contract that is
denominated in a currency (the "Contract Currency") other than the
currency of Customers jurisdiction. At Brokers discretion, Customer
may deposit in a Pledge Account Collateral in the form of cash or
securities denominated in a currency other than the Contract Currency
(the "Base Currency"). In that
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event, Broker shall determine Customer's margin requirements in the
Base Currency on any day in a commercially reasonable manner based on
current exchange rates between the Base Currency and the Contract
Currency.
In determining whether Collateral is sufficient to satisfy Initial
Margin requirements of any Exchange, the Value of securities
denominated in a currency shall be determined by Broker.
4. Bank at no time shall have any responsibility for determining
eligibility, value or adequacy of Collateral held in the Pledge
Account. Collateral held in any Pledge Account:
(i) will be held by Bank as agent of Broker subject to the terms and
conditions of the Custody Agreement, as modified by this
Agreement. This Agreement shall be controlling with respect to
each Pledge Account in the event of conflicting provisions;
(ii) may be released, transferred or sold only in accordance with the
terms of this Agreement; and
(iii) except as provided herein, shall not be made available to Broker
or to any person claiming through Broker, including creditors of
Broker.
In accordance with the Customer Agreement, Customer hereby grants to
Broker a continuing security interest in the Collateral and the
proceeds thereof (but not such portion of the Collateral which
constitutes Excess Collateral) subject to the terms and conditions of
this Agreement. Such security interest will terminate at the earlier
of (1) release of such Collateral by Broker as provided herein, or (2)
such time as such Collateral becomes Excess Collateral. The Collateral
shall at all times remain the property of Customer subject only to the
interest and rights therein of Broker as secured party thereof as
provided in this Agreement.
5. Other than pursuant to paragraph 10, Collateral shall only be
transferred or released from any Pledge Account upon Instructions from
Broker. Customer and Bank represent to Broker that Bank is not an
affiliate of Customer.
6. At Brokers discretion, Customer may substitute as Collateral, cash,
U.S. Government securities (or any combination thereof) of equal or
greater Value, or, if applicable, cash or securities (or any
combination thereof) denominated in a foreign currency (collectively
"Assets") of equal or greater Value. Upon request from Customer
identifying the Collateral to be substituted, Broker agrees to
promptly give Instructions to Bank to release from the Pledge Account
Assets of an equal Value, or such lesser amount as may be directed by
Customer, upon receipt of substitute Collateral.
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7. Broker shall promptly notify Customer of the amount of any Excess
Funds in a Pledge Account. Upon request of Customer, Broker shall
promptly give Instructions to Bank to release Assets, the Value of
which in the aggregate does not exceed the amount of such Excess
Collateral.
8. Interest on U.S. Government securities held in any Pledge Account will
be automatically credited by Bank in immediately available funds to an
account designated in writing by Customer the date that such funds
become due and payable. Amounts received on U.S. Government securities
which mature or are redeemed will be credited to the Pledge Account or
an account designated by Customer in immediately available funds on
the date funds are received by Bank.
9. Bank shall promptly give Notice by Bank to Customer, and Broker of,
and transmit to both, written confirmation of each transfer into or
out of any Pledge Account. In addition, Bank shall provide Broker with
monthly statements showing transactions and all cash, securities and
other property held in the Pledge Account.
10. Broker shall have access to the Collateral only in accordance with the
following:
(A) If Variation Margin is required, then Broker shall give
Instructions from Broker to Customer and such Variation
Margin shall first be satisfied by reducing the balance, if
any, of the Trading Account with Broker. If the balance of
such Trading Account is insufficient, then Broker shall
include in such Instructions the amount of the Variation
Margin.
Unless a shorter notice period is required by the Exchange
on which the futures positions are carried, or, a longer
notice period is agreed upon by Broker and Customer,
(i) 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 the exchange is
open for business, which Variation Margin shall first have
been satisfied from any amounts currently credited to
Customers Trading Account with Broker in connection with
which the Variation Margin is required, Customer shall
transfer to Broker such Variation Margin not later than 4:30
PM on the same day on
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which such notice was given. Unless a shorter period of time
is required or specified as referenced above.
(ii) if Notice by Broker to Customers is given of the need for
Variation Margin subsequent to 11:30 a.m. but prior to 4:30
p.m. New York time, then, Customer shall cause such
Variation Margin to be transferred to Broker not later than
11:30 a.m. New York time on the next succeeding day or if
not in US Dollars, then the transfer is to be completed in
accordance with market standards. (Any Notice by Broker to
Customer after 4:30 p.m. New York time but before the end of
the business day shall be deemed to have been given prior to
11:30 a.m. New York time on the next succeeding day.)
In either case, Broker shall immediately notify Customer in
writing of the receipt of Variation Margin.
(B) If Broker has not received the requested Variation Margin
within the applicable time period as provided in paragraph
(A) above, or has not timely made any other payment, deposit
or delivery ("Payment") required under this Agreement, the
Customer Agreement in respect of the Trading Account or the
rules and regulation of the applicable Exchange or the
Commodity Futures Trading Commission (other than a failure
to pay brokerage commissions, then Notice by Broker to
Customer of such failure shall be given immediately.
(C) If Broker does not receive the Variation Margin within the
time periods required in paragraph (A) and (B) above, then
Broker may give
(i) Notice by Broker to Bank of Customer's failure to provide
Payments; 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
Bank, Bank shall give Notice by Bank to Customer of its
receipt of such Notice by Broker.
(D) If Customer has failed to transfer the required Variation
Margin and/or Payments to Broker during the period specified
in paragraph (A) above or any event of default with respect
to Customer under the Customer Agreement shall have occurred
then
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(i) Broker may take such action contemplated by the Customer
Agreement, including the following: Broker may give
Instructions from Broker to Bank to (a) transfer eligible
securities from such Pledge Account to Broker, (b) to sell
at the prevailing market price such of the Collateral in the
Pledge Account as necessary to provide for payment to Broker
of the amount of Variation Margin that Broker shall have
specified in the Notice and transfer the proceeds of such
sale to Broker, or
(ii) with respect to Collateral in the form of cash, Broker
may give Instructions from Broker to Bank immediately to
transfer cash 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 contemporaneously therewith give Notice by Bank
to Customer of its receipt of such Instructions from Broker
to Bank and, upon taking any action pursuant to such
Instructions, shall contemporaneously therewith give Notice
by Bank to Customer of such actions.
(E) Bank shall retain in such Pledge Account any Collateral in
excess of the amount specified in Instructions by Broker to
Bank, including any proceeds from the sale of securities in
excess of such amount. Bank shall give consideration to any
timely requests by Customer with respect to particular
securities to be transferred or sold, and shall sell any
securities in the principal market for such securities, or
in the event such principal market is closed, to sell them
in a commercially reasonable manner.
11. Neither Broker nor any person claiming through Broker shall have access to
Collateral in any Pledge Account established and maintained by Customer
other than the applicable Pledge Account established and maintained
pursuant to this Agreement and only in accordance with the provisions of
this Agreement.
12. Any and all expenses of establishing, maintaining, or terminating the
Pledge Account, including without limitation any and all expenses incurred
by Bank in connection with the Pledge Account, shall be borne by Customer.
13. No amendment of this Agreement shall be effective unless in writing and
signed by a duly authorized officer of each of Broker, Customer and Bank.
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14. All notices, instructions, notification and other communications hereunder
(each a "Notice") shall be, unless otherwise stated herein, hand-delivered
or transmitted by a facsimile sending device (except that notice of
termination shall be sent by certified mail) addressed as set forth below
(or as set forth in a subsequent Notice). Each of Broker, Customer and Bank
may act upon any such Notice reasonably believed by such party to be
authorized to be given in accordance with this Agreement and to be genuine.
(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.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx
AND
The Prudential Series Fund, Inc.
Xxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxx
AND
The Prudential Series Fund, Inc.
c/o Quantitative Investment Management
00 XXX Xxxxxxx, 0xx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Associate Manager - Operations
(C) if to Broker, to:
X.X. Xxxxxx Futures Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Futures' Manager-Operations
15. Except as specifically provided herein, this Agreement does not affect
any other agreement entered into among the parties hereto.
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16. Any of the parties may terminate this Agreement upon 30 days' written
Notice to the other parties hereto; provided, however, 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 reasonably acceptable to Broker.
17. 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. This Agreement shall be binding on Broker, Bank and
Customer and their respective successors and assigns.
18. 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. If any provision
or condition of this Agreement shall be held to be invalid or
unenforceable by any court, regulatory or self-regulatory agency or
body, such invalidity or unenforceability shall attach only to that
provision or condition, to the extent permitted by applicable law.
19. Bank's duties and responsibilities are as set forth in this Agreement
and no implied duties, covenants or obligations shall be read into
this Agreement against Bank. 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.
As between Customer and Bank, the terms of the Custody Agreement shall
apply with respect to any Bank losses or liabilities arising out of
matters covered by this Agreement.
As between Bank and Broker, Broker agrees to reimburse and hold Bank
harmless against any claims, costs, damages, taxes, actions, expenses,
(including reasonable counsel fees) or other liabilities whatsoever
which may be imposed upon Bank or incurred by Bank (other than as a
result of Bank's or Customers negligence or willful misconduct) in
connection with Brokers negligence or willful misconduct.
Under no circumstances shall Bank be liable to Customer or Broker for
consequential damages. However, while this is not a complete list of
recoverable damages, Bank acknowledges liability for the following:
(a) interest losses for the period until misdelivered securities or
funds are correctly delivered (and receipt acknowledged); (b) direct
expenses from any necessary alternative means of delivery of
securities or funds; (C) fines;
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(d) penalties; and (e) reasonably attorney's fees are not
consequential damages.
20. Notwithstanding anything to the contrary in this or any other
Agreement, it is hereby agreed that
(a) Liabilities or other obligations relating to a particular Pledge
Account shall be liabilities or obligations of that Pledge Account
only and not of any other Pledge Account and shall be paid or
performed only from the assets in that Pledge Account or the proceeds
thereof without access to any other assets of Customer.
(b) Property held in a particular Pledge Account shall not be
commingled with the property of any other Pledge Account.
(c) Broker shall not have access to Collateral in any Pledge Account
established and maintained by Customer other than the applicable
Pledge Account established and maintained pursuant to this Agreement.
Such access shall be governed by, and shall only be in accordance
with, this Agreement.
(d) In the event of a conflict between the terms of the Customer
Agreement and this Pledge Agreement, the Customer Agreement shall be
controlling.
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20. Paragraphs 19 and 20 shall survive the termination of this
Agreement.
DATE: PRUDENTIAL IN VESTMENT CORPORATION,
ON BEHALF OF THE PRUDENTIAL
SERIES FUND, INC.
By: XXXXXXX X. XXXXXXXXX
---------------------------
Xxxxxxx X. Xxxxxxxxx
TITLE: Vice President
DATE: X.X. XXXXXX FUTURES INC.
By: XXXXX XXXXXXX
---------------------------
Xxxxx Xxxxxxx
TITLE: Associate
DATE: INVESTORS FIDUCIARY TRUST COMPANY
BY: XXXX XXXXX
---------------------------
TITLE: Vice President
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SCHEDULE A
- Conservative Balanced Portfolio
- Diversified Bond Portfolio
- Flexible Managed Portfolio
- Government Income Portfolio
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