CUSTODY AGREEMENT
AGREEMENT dated April 15, 1980 between THE PRUDENTIAL VARIABLE
CONTRACT ACCOUNT-2 ("VCA-2"), a separate account of The Prudential Insurance
Company of America ("Prudential") registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, and
MANUFACTURERS HANOVER TRUST COMPANY, a banking corporation organized under the
laws of the State of New York ("Custodian").
W I T N E S S E T H:
WHEREAS, VCA-2 desires to employ Custodian as a custodian of the
securities and property of VCA-2, and Custodian desires to accept such
employment, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
VCA-2 and Custodian hereby agree as follows:
1. RECEIPT AND DISBURSEMENT OF CASH
A. Custodian shall open and maintain a custody account (the "Account")
in the name of VCA-2, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement. Custodian shall hold in the Account all
cash received by it from or for the account of VCA-2.
B. Custodian shall make payments of cash for the account of VCA-2 only
(i) for the purchase of securities for the portfolio of VCA-2 upon the delivery
of such securities to Custodian, either registered in the name of VCA-2 or
Custodian's nominee referred to in Section 2 below,or in bearer form or proper
form for transfer,or by book-entry delivery to Custodian's account
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in the Depository Trust Company ("DTC") for the benefit of VCA-2; (ii) to
another bank for the purpose of making payments to VCA-2 participants or
beneficiaries of participants in accordance with their respective contracts as a
result of the withdrawal of all or a portion of an accumulation account, an
election to effect a variable annuity or the payment of a death benefit provided
for under the contract; (iii) to Prudential, as a result of the election by a
VCA-2 participant to transfer all or a portion of his accumulation account to a
companion fixed-dollar contract account or to cause a fixed-dollar annuity to be
effected; (iv) to Prudential, upon withdrawal by Prudential of all or part of
the proportionate interest in VCA-2 then held by it; (v) for the payment of
interest, dividends, taxes, advisory, management or supervisory fees or
operating expenses (including, without limitation, fees payable to Prudential
and fees for legal, accounting and auditing services), (vi) for payments in
connection with the conversion, exchange or surrender of securities owned or
subscribed to by VCA-2 held by or to be delivered to Custodian; (vii) to any
other custodian of the securities or property of VCA-2; or (viii) for other
proper account purposes. Before making any such payment, Custodian shall receive
(and may rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (i) thru (vii) of
this subsection B, and also, in respect of Item (viii), upon receipt of an
officers' certificate and a certified copy of a resolution of the VCA-2
Committee specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose and naming the person or persons to whom such payment is to be
made.
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C. Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Custodian for the
account of VCA-2.
2. RECEIPT OF SECURITIES
Custodian shall hold in the Account, pursuant to the provisions of
this Agreement, all securities received by it for the account of VCA-2. All such
securities shall be held or disposed by Custodian for, and subject to at all
times to the instructions of, VCA-2 pursuant to the provisions of this
Agreement. Custodian shall be authorized to redeposit in DTC and the Federal
Reserve book-entry system such of the securities of VCA-2 as are eligible for
such redeposit. Any securities so redeposited shall be represented in one or
more accounts in the name of Custodian which do not include any of Custodian's
assets other than assets held as fiduciary, custodian or otherwise for
customers. Securities held by Custodian in definitive form, i.e., not so
redeposited, shall be registered in the name of Custodian's nominee Gibco, which
shall be used only for registration of securities owned by or in portfolios
managed by Prudential. Any of VCA-2's securities which are registered in the
name of Gibco shall be physically segregated at all times from the securities of
any other persons, firms, or corporations, including, without limitation, any
other securities registered in the name of Gibco. Custodian shall have no power
or authority to lend, assign, hypothecate, pledge or otherwise dispose of any
such securities and investments, except pursuant to the directive of VCA-2 and
only for the account of VCA-2 as set forth in Section 3 below.
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3. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any securities
of VCA-2 held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange, or deliver securities held by it hereunder only (a) for sales of such
securities for the account of VCA-2 upon receipt of Custodian of payment
therefor, (b) when such securities are called, redeemed or retired or otherwise
become payable, (c) for examination by any broker selling any such securities in
accordance with "street delivery" custom, (d) in exchange for or upon conversion
into other securities alone or other securities and cash whether pursuant to any
plan or merger, consolidation, reorganization, recapitalization or readjustment,
or otherwise, (e) upon conversion of such securities pursuant to their terms
into other securities, (f) upon exercise of subscription, purchase or other
similar rights represented by such securities, (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities, or (h) for
other proper account purposes. As to any deliveries made by Custodian pursuant
to items (b), (d), (e), (f), and (g), securities or cash receivable in exchange
therefor shall be deliverable to Custodian. Before making any transfer, exchange
or delivery under the terms of Items (a), (b), (c), (d), (e), (f), or (g) of
this Section 3, the Custodian shall receive an officers' certificate authorizing
such transfer, exchange or delivery and stating that it is for a purpose
permitted by such Items and also, in respect of Item (h), upon receipt of an
officers' certificate and a certified copy of a resolution of the VCA-2
Committee specifying the securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be a proper
account purpose, and naming
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the person or persons to whom delivery of such securities shall be
made.
4. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) Present for payment all coupons and other income
items held by it for the account of VCA-2 which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of VCA-2; (b) Collect interest and cash dividends received, with notice to
VCA-2, for the account of VCA-2, provided that cash dividends and interest on
securities held in the Account, either in book-entry form or in Custodian's
nominee name, shall be credited automatically to the Account on the payable date
whether or not actually collected by Custodian on that date; (c) Hold for the
account of VCA-2 hereunder all stock dividends, rights and similar securities
issued with respect to any securities held by it hereunder; (d) execute as agent
on behalf of VCA-2 all necessary ownership certificates required by the Internal
Revenue Code or the Income Tax Regulations of the United States Treasury
Department or under the laws of any State now or hereafter in effect, inserting
VCA-2's name on such certificate as the owner of the securities covered thereby,
to the extent it may lawfully do so.
5. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of VCA-2, except in accordance
with the instructions contained in an officers' certificate. Custodian shall
promptly deliver, or cause to be executed and delivered, to VCA-2 all notices,
proxies and proxy soliciting materials relating to such securities, such proxies
to be executed by the registered holder of such securities, but
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without indicating the manner in which such proxies are to be voted.
Custodian shall transmit promptly to VCA-2 all written information
(including, without limitation, financial statements and reports and pendency of
calls and maturities of securities and expirations of rights in connection
therewith) received by Custodian directly or indirectly from issuers of the
securities being held for VCA-2. With respect to tender or exchange offers,
Custodian shall transmit promptly to VCA-2 all written information received by
the Custodian directly or indirectly from issuers of the securities whose tender
or exchange is sought and from the party (or his agent) making the tender or
exchange offer.
6. TAXES
VCA-2 assumes the duty of filing any and all tax reports and returns
as well as full responsibility for the payment of all taxes due on the income
Custodian collects for VCA-2 and on any transactions which Custodian may handle
pursuant to this Agreement.
7. FEES AND EXPENSES
Custodian shall be compensated for its services pursuant to this
Agreement by fee and/or balance arrangements agreed upon by the parties from
time to time. Expenses incurred for postage, insurance, exchange, correspondent
and similar charges in connection with transactions under this Agreement may not
be deducted from sales proceeds or charged against the Account or
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any other Prudential account without specific authorization.
8. MATTERS RELATING TO LIABILITY OF CUSTODIAN
A. Custodian shall maintain detailed records of all securities and
property held in the Account. All securities and property held by Custodian in
the Account shall be kept with the care exercised by Custodian with respect to
its own securities. Custodian assumes the entire responsibility for any loss, to
the extent of the market value thereof at the date of the discovery of such
loss; provided that Custodian shall be relieved of such responsibility to the
extent that such loss was occasioned by other than the negligence of, or
robbery, burglary or theft by, its employees. Custodian represents and warrants
to VCA-2 that it presently has in force, and will maintain in force during the
term of this Agreement, Bankers Blanket Bond insurance coverage under Form No.
24 in an amount which Custodian deems to be appropriate, together with a
"Central Handling of Securities - Discovery Form" Rider thereto. Although
Custodian carries Bankers Blanket Bond insurance coverage to insure itself
against loss from any cause, it is understood that Custodian shall be under no
obligation to insure for the direct benefit of VCA-2. Custodian's responsibility
for all securities and property held under this Agreement shall be not less than
that of a bailee for hire under the statutory and case law of the State of New
York.
B. Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution of the
VCA-2 Committee, and may rely on the genuiness of any such document which it may
in good faith believe to have been validly executed. Custodian shall not be
liable for executing, failing to execute, or any mistake in the execution of,
oral instructions from VCA-2 with respect to the Account prior to
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confirmation thereof in writing, except in case of the negligence or willful
misconduct of Custodian and/or its employees.
C. In consideration of Custodian's registration of any securities in
the name of its nominee, VCA-2 agrees to indemnify and hold harmless Custodian
and its nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or its
nominee by reason of such registration, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or wilful misconduct.
Custodian is authorized to charge any account of VCA-2 for such items.
D. Custodian shall not deliver any cash, securities, or other property
from the Account to or for the account of any natural person, other than a
natural person acting in his official capacity on behalf of an instrumentality
of the Federal government or of any state government.
9. MATTERS RELATING TO USE OF BOOK-ENTRY SECURITIES SYSTEMS
A. Custodian shall promptly send or cause to be sent to VCA-2 a
confirmation of all transfers to or from the account, clearly distinguishing
between securities deposited in DTC or the Federal Reserve book-entry system and
those not so redeposited. Transaction statements shall be furnished to VCA-2 on
a daily basis.
B. With regard to securities redeposited in DTC or the Federal Reserve
book-entry system, Custodian shall also, by book-entry or otherwise, identify as
belonging to VCA-2 a quantity of securities in a fungible bulk of securities
either (i) held in accounts in the name of Custodian in DTC or the Federal
Reserve book-entry system, or (ii) registered in the name of Gibco.
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C. Custodian shall promptly send to VCA-2 (i) all reports which it
receives from DTC and the Federal Reserve book-entry system on their respective
systems of internal accounting control, and (ii) such reports on the system of
internal accounting control of Custodian as VCA-2 may reasonably request from
time to time.
10. REPORTS AND OTHER DOCUMENTS; INSPECTION
A. Custodian shall furnish VCA-2 with such reports as VCA-2 shall
reasonably request with respect to the securities and property of VCA-2 held in
the Account.
B. Custodian shall maintain records sufficient to determine and verify
information relating to the securities and property in the Account that may be
reported in Prudential's Annual Statement and supporting Schedules as filed with
various regulatory authorities and in connection with the audit of the financial
statements of VCA-2.
C. Custodian shall provide, upon request, affidavits for the Account
in the form of Attachments B, C and D to Circular Letter #2 (1977) of the New
York State Insurance Department or such other form as may be acceptable to
Custodian, Prudential and the New York State Insurance Department in order for
the securities and property in the Account to be recognized by the New York
State Insurance Department as admitted assets of Prudential, and to provide
similar affidavits for submission to the Insurance Departments of other states,
if requested by Prudential.
D. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times by
officers, employees and independent auditors employed by VCA-2, and by any
representative of an
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appropriate regulatory body; provided, however, that written instructions to
that effect are furnished to Custodian by the Chairman or Secretary of VCA-2 or
by the Treasurer, the Comptroller, any assistant treasurer or any assistant
comptroller of Prudential.
11. OFFICERS' CERTIFICATES
As used herein, "officers' certificate" shall mean a request or
direction or certification signed and countersigned on behalf of VCA-2 in
accordance with the provisions of the By-Laws of Prudential and related
resolutions of the Finance Committee of the Board of Directors of Prudential
which form part of Prudential's Booklet of Authorized Signatures furnished to
Custodian, as such Booklet may be revised from time to time. Any requirement in
this Agreement that an officers' certificate be furnished to Custodian shall be
satisfied if telephonic, facsimile or other non-written instructions to
Custodian are confirmed promptly by the delivery to Custodian of an officers'
certificate in accordance with the first sentence of this Section.
12. TERMINATION; ASSIGNMENT
A. This Agreement may be terminated by VCA-2, or by Custodian, on 60
days' notice, given in writing and sent by registered mail to the following
addresses:
(i) If to VCA-2, to Xxxxxxxxxx Xxxxx, Xxxxxx, Xxx Xxxxxx 00000, Attention:
Xxxxx Xxxxxxxxx, with a copy to Irving Xxxxxxx Xxx; and
(ii) If to Custodian, to 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Upon any termination of this Agreement, pending (i) appointment of a successor
to Custodian or (ii) a determination by the VCA-2 Committee to hold its cash,
securities and other property in its own custody, Custodian shall not deliver
cash, securities or other property of VCA-2 to VCA-2, but may deliver them to a
bank or trust company
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in the City of New York of its own selection, having an aggregate capital,
surplus and undivided profits, as shown by its last published report of not less
than five hundred thousand dollars ($500,000) as a temporary Custodian for VCA-2
to be held under terms similar to those of this Agreement; provided, however,
that Custodian shall not be required to make any such delivery or payment until
full payment shall have been made by VCA-2 of all liabilities constituting a
charge on or against the properties then held by Custodian or on or against
Custodian, and until full payment shall have been made to Custodian of all its
fees, compensation, costs and expenses, subject to the provisions of Section 8
of this Agreement.
B. This Agreement may not be assigned by Custodian without the consent
of VCA-2, authorized by a resolution of the VCA-2 Committee.
13. MISCELLANEOUS
A. The waiver by either party of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach.
B. This Agreement cannot be amended or terminated orally.
C. This Agreement shall be governed by and construed in accordance
with the law of the State of New York.
D. This Agreement may be executed in several counterparts.
E. Headings herein are for reference purposes only and shall not be
deemed to have any substantive effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
THE PRUDENTIAL VARIABLE CONTRACT
ACCOUNT-2
By /s/ Xxxxx Xxxxxxxxx
--------------------------------
Xxxxx Xxxxxxxxx, Chairman
MANUFACTURERS HANOVER TRUST COMPANY
By: /s/ Xxxxx X. Segadini
--------------------------------
XXXXX X. SEGADINI Vice President
Vice President
