EXHIBIT-99.B8
CUSTODIAN AGREEMENT
BETWEEN
THE MERRIMAC SERIES
AND
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
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1. Bank Appointed Custodian................................................ 1
2. Definitions............................................................. 1
2.1 Authorized Person................................................ 1
2.2 Board............................................................ 1
2.3 Security......................................................... 1
2.4 Portfolio Security............................................... 1
2.5 Officers' Certificate............................................ 2
2.6 Book-Entry System................................................ 2
2.7 Depository....................................................... 2
2.8 Proper Instructions.............................................. 2
3. Separate Accounts....................................................... 2
4. Certification as to Authorized Persons.................................. 2
5. Custody of Cash......................................................... 3
5.1 Purchase of Securities........................................... 3
5.2 Redemptions...................................................... 3
5.3 Distributions and Expenses of Fund............................... 3
5.4 Payment in Respect of Securities................................. 3
5.5 Repayment of Loans............................................... 4
5.6 Repayment of Cash................................................ 4
5.7 Foreign Exchange Transactions.................................... 4
5.8 Other Authorized Payments........................................ 4
5.9 Termination...................................................... 4
6. Securities.............................................................. 4
6.1 Segregation and Registration..................................... 4
6.2 Voting and Proxies............................................... 5
6.3 Corporate Action................................................. 5
6.4 Book-Entry System................................................ 6
6.5 Use of a Depository.............................................. 6
6.6 Use of Book-Entry System for Commercial Paper.................... 7
6.7 Use of Immobilization Programs................................... 8
6.8 Eurodollar CDs................................................... 8
6.9 Options and Futures Transactions................................. 8
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter................................ 8
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges.................................. 9
6.10 Segregated Account............................................... 9
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6.11 Interest Bearing Call or Time Deposits........................... 10
6.12 Transfer of Securities........................................... 11
7. Redemptions............................................................. 12
8. Merger, Dissolution, etc. of Fund....................................... 12
9. Actions of Bank Without Prior Authorization............................. 12
10. Collection and Defaults................................................. 13
11. Maintenance of Records and Accounting Services.......................... 13
12. Fund Evaluation and Yield Calculation................................... 14
12.1 Fund Evaluation................................................. 14
12.2 Yield Calculation............................................... 14
13. Additional Services..................................................... 15
14. Duties of the Bank...................................................... 15
14.1 Performance of Duties and
Standard of Care................................................. 15
14.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States............................ 16
14.3 Duties of the Bank with Respect to Property
Held Outside of the United States................................ 16
14.4 Insurance........................................................ 18
14.5 Fees and Expenses of Bank........................................ 18
14.6 Advances by Bank................................................. 19
15. Limitation of Liability................................................. 19
16. Termination............................................................. 20
17. Confidentiality......................................................... 21
18. Notices................................................................. 21
19. Amendments.............................................................. 21
20. Parties................................................................. 22
21. Governing Law........................................................... 22
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22. Counterparts............................................................ 22
23. Entire Agreement........................................................ 22
24. Limitation of Liability................................................. 22
25. Several Obligations of the Portfolios................................... 22
APPENDICES
Appendix A.................................... Fee Schedule
Appendix B.................................... Portfolios
Appendix C.................................... Additional Services
Appendix D.................................... Select Foreign Sub-Custodians
Appendix E.................................... Reports
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CUSTODIAN AGREEMENT
AGREEMENT made as of this June 1, 1998, between THE MERRIMAC SERIES, a company
organized under the laws of Delaware (the "Fund"), and INVESTORS BANK & TRUST
COMPANY, a Massachusetts trust company (the "Bank").
The Fund, an open-end management investment company on behalf of the portfolios
listed on Appendix B hereto (as such Appendix B may be amended from time to
time) (each a "Portfolio" and collectively, the "Portfolios"), desires to place
and maintain all of its portfolio securities and cash in the custody of the
Bank. The Bank has at least the minimum qualifications required by Section
17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to act as
custodian of the portfolio securities and cash of the Fund, and has indicated
its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as custodian of
its portfolio securities and cash delivered to the Bank as hereinafter described
and the Bank agrees to act as such upon the terms and conditions hereinafter set
forth. For the services rendered pursuant to this Agreement the Fund agrees to
pay to the Bank the fees set forth on Appendix A hereto.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons duly
authorized to give Proper Instructions or otherwise act on behalf of the Fund 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 Directors or the Board of Trustees of
the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same meaning
assigned to such term in the Securities Act of 1933, as amended, 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 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, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security owned by the
Fund.
2.5 Officers' Certificate. Officers' Certificate will mean, unless otherwise
indicated, any request, direction, instruction, or certification in writing
signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal 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 ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934 ("Exchange 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) 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 Fund 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 Fund
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 instruction and the sole obligation of the Bank with respect to any
follow-up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Fund. The Fund shall be responsible, at
the Fund's expense, for taking any action, including any reprocessing, necessary
to correct any such discrepancy or error, and to the extent such action requires
the Bank to act, the Fund 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 accompanied by a detailed description of
procedures approved by the Fund, 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 Fund's assets.
3. Separate Accounts. If the Fund has more than one series or portfolio, the
Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon). Unless the context otherwise requires, any reference in this Agreement
to any actions to be taken by the Fund shall be deemed to refer to the Fund
acting on behalf of one or more of its series, any reference in this Agreement
to any assets of the Fund, including, without limitation, any portfolio
securities and cash and earnings thereon, shall be deemed to refer only to
assets of the applicable series, any duty or obligation of the Bank hereunder to
the Fund shall be deemed to refer to duties and obligations with respect to such
individual series and any obligation or liability of the Fund hereunder shall be
binding only with respect to such individual series, and shall be discharged
only out of the assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant Secretary
of the Fund 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
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set forth in the most recent certification on file (including without limitation
any person named in the most recent certification who is no longer an Authorized
Person as designated therein), the Secretary or Assistant Secretary of the Fund
will sign a new or amended certification 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 Fund which has been signed
by Authorized Persons named in the most recent certification received by the
Bank.
5. Custody of Cash. As custodian for the Fund, the Bank will open and maintain a
separate account or accounts in the name of the Fund or in the name of the Bank,
as Custodian of the Fund, and will deposit to the account of the Fund all of the
cash of the Fund, except for cash held by a subcustodian appointed pursuant to
Sections 14.2 or 14.3 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 Fund
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 Fund, notification from
the Fund'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 Fund, 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 Fund,
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 Fund 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 (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank 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 repurchase or
redemption of common shares of the Fund offered for repurchase or redemption in
accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the account of the
Fund 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 Fund.
5.4 Payment in Respect of Securities. For payments in connection with the
conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
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5.5 Repayment of Loans. To repay loans of money made to the Fund, 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 Fund for the purpose
of collateralizing the obligation to return to the Fund certificates borrowed
from the Fund representing Portfolio Securities, but only upon redelivery to the
Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(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 Fund 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 Fund deals or for their failure to comply
with the terms of any contract or option.
(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 Fund 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 Fund's benefit or in which
the Fund 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 Fund
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 Fund on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of the Fund, or
other obligations of the Fund incurred for proper Fund 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 (other than the Person
certifying such resolution) 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 Fund, 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 set forth
pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided herein, and
except for securities to be delivered to any subcustodian appointed pursuant to
Sections 14.2 or 14.3 hereof, 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 the 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 Fund
pursuant 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
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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 and any Regulations of the Treasury
Department 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 Fund 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 the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will 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 Fund all notices, proxies and proxy
soliciting materials delivered to the Bank with respect to such Securities, such
proxies to be executed by the registered holder of such Securities (if
registered otherwise than in the name of the Fund), 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 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 Fund promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Fund of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Fund via telecopier and/or overnight
courier all notices, information statements or other materials relating to the
Corporate Action within twenty-four (24) hours of receipt of such materials by
the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Fund
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
necessary Securities, consents and other materials 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 required
Response if Proper Instructions relating to such Response
and all necessary Securities, consents and other materials
are not received by and in the possession of the Bank 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 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 its expiration.
(c) In the event that the Fund 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 shall be 48 hours prior to the Response
expiration time set by the depository processing such
Corporate Action.
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(d) Section 14.3(g) of this Agreement shall govern any
Corporate Action involving Foreign Portfolio Securities
held by a Selected Foreign Sub-Custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a certified copy of a
resolution of the Board specifically approving deposits of Fund 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 Fund'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 Fund. Where
securities are transferred to the Fund's account, the Bank
shall also, by book entry or otherwise, identify as
belonging to the Fund 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 Fund or shall pay cash
collateral against the return of Portfolio Securities
loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such 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 Fund. The
Bank (or its agent) shall transfer securities sold or
loaned for the account of the Fund 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
securities loaned by the Fund 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 Fund. Copies of all
advices from the Book-Entry System of transfers of
securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by
the Bank and shall be provided to the Fund at its
request. The Bank shall send the Fund a
confirmation, as defined by Rule 17f-4 of the 1940
Act, of any transfers to or from the account of
the Fund;
(d) The Bank will promptly provide the Fund 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 securities deposited in
the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a certified 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
6
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(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 Fund 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 securities to or for the account
of the Fund and the Fund shall pay cash collateral against
the return of Portfolio Securities loaned by the Fund only
upon delivery of the Securities to or for the account of
the Fund; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against
payment therefor or, in the event Portfolio Securities are
loaned, delivery of Securities will be made only against
receipt of the initial cash collateral to or for the
account of the Fund; 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
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 Fund;
(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 Fund'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 Fund 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 Fund 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 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 received and approved the arrangements, upon receipt
of Proper Instructions and upon receipt of confirmation from an Issuer (as
defined below) that the Fund has purchased such Issuer's Book-Entry Paper, the
Bank shall issue and hold in book-entry form, on behalf of
7
the Fund, commercial paper issued by issuers with whom the Bank has entered into
a book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by
the Fund 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 Fund's
purchase of Book-Entry Paper through the Bank will
identify, by book-entry, commercial paper belonging to the
Fund 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 Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for
the account of the Fund upon contemporaneous (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 Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt
of advice that payment for such Book-Entry Paper has been
transferred to the Fund, and (ii) the making of an entry
on the records of the Bank to reflect such payment for the
account of the Fund; and
(e) The Bank will send to the Fund such reports on its
system of internal accounting control with respect to the
Book-Entry Paper as the Fund may reasonably request from
time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has received a
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 reviewed and approved 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 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
Fund 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 Fund.
6.9 Options and Futures Transactions.
(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 Fund 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 registered with the National
Association of Securities Dealers, Inc. (the
"NASD"), and, if necessary, the Fund, relating to
the compliance with the rules of the Options
Clearing
8
Corporation and of any registered national
securities exchange, or of any similar organization
or organizations.
(ii) Unless another agreement requires it to do
so, the Bank shall be under no duty or obligation
to see that the Fund has deposited or is
maintaining adequate margin, if 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 Fund. The
Bank shall have no responsibility for the legality
of any put or call purchased or sold on behalf of
the Fund, 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 Fund that the
amount of such collateral held by a broker or held
in a Segregated Account is sufficient to protect
such broker or the Fund against any loss; (ii)
effect the return of any collateral delivered to a
broker; or (iii) advise the Fund that any option
it holds, has or is about to expire. Such duties
or obligations shall be the sole responsibility of
the Fund.
(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 Fund in accordance with the provisions
of any agreement entered into upon the receipt of
Proper Instructions among the Fund, the Bank and a
Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any
similar organization or organizations, regarding
account deposits in connection with transactions
by the Fund.
(ii) The responsibilities of the Bank as to
futures, puts and calls traded on commodities
exchanges, any Futures Commission Merchant account
and the Segregated Account shall be limited as set
forth in subparagraph (a)(2) of this Section 6.8
as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and
Futures and puts and calls thereon instead of
options.
6.10 Segregated Account. The Bank shall upon receipt of Proper Instructions
establish and maintain a Segregated Account or Accounts for and on behalf of the
Fund.
(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 Fund, the Bank and a
broker-dealer registered under the Exchange Act
and a member of the NASD or any Futures Commission
Merchant 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 Fund;
(ii) for the purpose of segregating cash or
securities in connection with options purchased or
written by the Fund or commodity futures purchased
or written by the Fund;
(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
Fund's
9
then outstanding forward commitment or
"when-issued" agreements relating to the purchase
of Portfolio Securities and all the Fund's then
outstanding commitments under reverse repurchase
agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by the Fund
with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release
or releases of the Securities and Exchange
Commission 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 (e), 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 Fund 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 Fund'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 Fund'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 Fund's obligations thereunder are met from
assets of the Fund other than those in the
Segregated Account;
(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
(e) 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 Fund 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 Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "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 Fund and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Fund.
10
6.12 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section 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 6.11, and
shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity 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 Fund, 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
securities alone or other 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
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
Fund upon authorization from the Fund;
(e) In the case of option contracts owned by the Fund, 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 Fund 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 Fund 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 notice to the Fund from the lender in accordance
with the normal procedures of the lender and any loan
agreement between the fund 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;
11
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by
the Bank of the fair market value of such security, as set
forth in the Proper Instructions received by the Bank
before such payment is made;
(i) for the purpose of delivering securities lent by the
Fund to a bank or broker dealer, but only against receipt
in accordance with street delivery custom except as
otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank,
and upon receipt of payment in connection with any
repurchase agreement relating to such securities entered
into by the Fund;
(j) for other authorized transactions of the Fund 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 Fund (other than the officer
certifying such resolution) 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 Fund 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 Fund held by the Bank in
connection with redemptions and repurchases by the Fund of outstanding common
shares, the Bank will rely on notification by the Fund'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 Articles of Incorporation or Declaration of Trust and By-laws of the
Fund (the "Articles"), from assets available for said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following transactions,
not in the ordinary course of business, namely, the merger of the Fund into or
the consolidation of the Fund with another investment company, the sale by the
Fund of all, or substantially all, of its assets to another investment company,
or the liquidation or dissolution of the Fund 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 Fund 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 Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of the Fund
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 Fund and
hold for the account of the Fund all income, dividends, interest and other
payments or distributions of cash with respect to the Portfolio Securities held
thereunder;
12
9.2 Present for payment all coupons and other income items held by it for the
account of the Fund which call for payment upon presentation and hold the cash
received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund 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.
9.4 Execute as agent on behalf of the Fund all necessary ownership and other
certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund'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 and any Regulations of the
Treasury Department issued thereunder, or under the 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 Fund; 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 Fund notice actually received by it of any call for redemption, offer of
exchange, right of subscription, reorganization or other proceedings affecting
such 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
notify the Fund 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 Records and Accounting Services. The Bank will maintain
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 of the 1940 Act. The Bank will furnish to the
Fund such reports at such times as are set forth on Appendix E hereto. The books
and records of 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 Fund 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 books of account and
render statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to shareholders
and others, audits of accounts, and other ministerial matters of like nature.
13
12. Fund Evaluation and Yield Calculation
12.1 Fund 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 capital stock of the
Fund, such determination to be made in accordance with the provisions of the
Articles and By-laws of the Fund and the Prospectus and Statement of Additional
Information relating to the Fund, 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 Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination. In computing the net asset value hereunder, 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 Fund and in respect of
liabilities of the Fund 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
price quotations are available, and (v) the method of computation of the public
offering price on the basis of the net asset value of the shares, and 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 Calculation. The Bank will compute the performance results of the
Fund (the "Yield 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 to,
published interpretations of or general conventions accepted by the staff of the
Securities and Exchange Commission 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 Yield Calculation for the
Fund for the stated periods of time as shall be mutually
agreed upon, and communicate in a timely manner the result
of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will
derive the items of data necessary for the computation
from the records it generates and maintains for the Fund
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 Fund,
any of the Fund's designated agents or any of the Fund's
designated third party providers.
(c) At the request of the Bank, the Fund 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 the Fund. In the event that the
computation methods in the Releases or the Subsequent
Staff Positions or the application to the Fund 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 Fund, the Fund 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
14
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 Fund shall keep the Bank informed of all publicly
available information and of any non-public advice, or
information obtained by the Fund 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
Fund 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 Fund, at which time the fees set forth in
Appendix A shall be appropriately increased.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. 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 Fund, 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 the Fund, 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 the Fund or the propriety of the amount for
which the same are sold;
(c) the legality of an issue or sale of any common shares
of the Fund or the sufficiency of the amount to be
received therefor;
(d) the legality of the repurchase of any common shares of
the Fund or the propriety of the amount to be paid
therefor;
(e) the legality of the declaration of any dividend by the
Fund or the legality of the distribution of any Portfolio
Securities as payment in kind of such dividend; and
(f) any property or moneys of the Fund 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 Fund are such as may properly be held by the Fund
under the provisions of its Articles, By-laws, any federal
or state statutes or any rule or regulation of any
governmental agency.
15
14.2 Agents and Subcustodians with Respect to Property of the Fund Held in the
United States. The Bank may employ agents 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, 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 Fund's assets with
respect to property of the Fund held in the United States. The Bank shall have
no liability to the Fund or any other person by reason of any act or omission of
any subcustodian and the Fund shall indemnify the Bank and hold it harmless from
and against any and all actions, suits and claims, arising directly or
indirectly out of the performance of any subcustodian. Upon request of the Bank,
the Fund shall assume the entire defense of any action, suit, or claim subject
to the foregoing indemnity. The Fund shall pay all fees and expenses of any
subcustodian.
14.3 Duties of the Bank with Respect to Property of the Fund Held Outside of the
United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Bank to employ as
sub-custodians for the Fund's Portfolio Securities and
other assets maintained outside the United States the
foreign banking institutions and foreign securities
depositories designated on the Schedule attached hereto
(each, a "Selected Foreign Sub-Custodian"). Upon receipt
of Proper Instructions, together with a certified
resolution of the Fund's Board of Trustees, the Bank and
the Fund may agree to designate additional foreign banking
institutions and foreign securities depositories to act as
Selected Foreign Sub-Custodians hereunder. Upon receipt of
Proper Instructions, the Fund may instruct the Bank to
cease the employment of any one or more such Selected
Foreign Sub-Custodians for maintaining custody of the
Fund's assets, and the Bank shall so cease to employ such
sub-custodian as soon as alternate custodial arrangements
have been implemented.
(b) Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Bank and the
Fund, assets of the Fund shall be maintained in foreign
securities depositories only through arrangements
implemented by the foreign banking institutions serving as
Selected Foreign Sub-Custodians pursuant to the terms
hereof. Where possible, such arrangements shall include
entry into agreements containing the provisions set forth
in subparagraph (d) hereof. Notwithstanding the foregoing,
except as may otherwise be agreed upon in writing by the
Bank and the Fund, the Fund authorizes the deposit in
Euro-clear, the securities clearance and depository
facilities operated by Xxxxxx Guaranty Trust Company of
New York in Brussels, Belgium, of Foreign Portfolio
Securities eligible for deposit therein and the use of
Euro-clear in connection with settlements of purchases and
sales of securities and deliveries and returns of
securities, until notified to the contrary pursuant to
subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on
its books as belonging to the Fund the Foreign Portfolio
Securities held by each Selected Foreign Sub-Custodian.
Each agreement pursuant to which the Bank employs a
foreign banking institution shall require that such
institution establish a custody account for the Bank and
hold in that account Foreign Portfolio Securities and
other assets of the Fund, and, in the event that such
institution deposits Foreign Portfolio Securities in a
foreign securities depository, that it shall identify on
its books as belonging to the Bank the securities so
deposited.
(d) Agreements with Foreign Banking Institutions. Each of
the agreements pursuant to which a foreign banking
institution holds assets of the Fund (each, a "Foreign
Sub-Custodian
16
Agreement") shall be substantially in the form attached as
Appendix D hereto and shall provide that: (a) the Fund's
assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the
foreign banking institution or its creditors or agent,
except a claim of payment for their safe custody or
administration (including, without limitation, any fees or
taxes payable upon transfers or reregistration of
securities); (b) beneficial ownership of the Fund's assets
will be freely transferable without the payment of money
or value other than for custody or administration
(including, without limitation, any fees or taxes payable
upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets
as belonging to the Bank; (d) officers of or auditors
employed by, or other representatives of the Bank,
including to the extent permitted under applicable law,
the independent public accountants for the Fund, will be
given access to the books and records of the foreign
banking institution relating to its actions under its
agreement with the Bank; and (e) assets of the Fund held
by the Selected Foreign Sub-Custodian will be subject only
to the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon
request of the Fund, the Bank will use its best efforts to
arrange for the independent accountants of the Fund to be
afforded access to the books and records of any foreign
banking institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to
the performance of such foreign banking institution under
its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from
time to time, as mutually agreed upon, statements in
respect of the securities and other assets of the Fund
held by Selected Foreign Sub-Custodians, including but not
limited to an identification of entities having possession
of the Foreign Portfolio Securities and other assets of
the Fund.
(g) Transactions in Foreign Custody Account. Transactions
with respect to the assets of the Fund held by a Selected
Foreign Sub-Custodian shall be effected pursuant to Proper
Instructions from the Fund to the Bank and shall be
effected in accordance with the applicable Foreign
Sub-Custodian Agreement. If at any time any Foreign
Portfolio Securities shall be registered in the name of
the nominee of the Selected Foreign Sub-Custodian, the
Fund agrees to hold any such nominee harmless from any
liability by reason of the registration of such securities
in the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio
Securities received for the account of the Fund and
delivery of Foreign Portfolio Securities maintained for
the account of the Fund may be effected in accordance with
the customary established securities trading or securities
processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of
receiving later payment for such securities from such
purchaser or dealer.
In connection with any action to be taken with respect to
the Foreign Portfolio Securities held hereunder,
including, without limitation, the exercise of any voting
rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other
action in connection with any other right, interest or
privilege with respect to such Securities (collectively,
the "Rights"), the Bank shall promptly transmit to the
Fund such information in connection therewith as is made
available to the Bank by the Foreign Sub-Custodian, and
shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications
with respect to such Rights, and any instructions relating
to the actions to be taken in connection therewith, as the
Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank
shall have no further duty or obligation with respect to
such Rights, including, without limitation, the
determination of
17
whether the Fund is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the
determination of whether any action proposed to be taken
with respect to such Rights by the Fund or by the
applicable Foreign Sub-Custodian will comply with all
applicable terms and conditions of any such Rights or any
applicable laws or regulations, or market practices within
the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each
Foreign Sub-Custodian Agreement with a foreign banking
institution shall require the institution to exercise
reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from
and against certain losses, damages, costs, expenses,
liabilities or claims arising out of or in connection with
the institution's performance of such obligations, all as
set forth in the applicable Foreign Sub-Custodian
Agreement. The Fund acknowledges that the Bank, as a
participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of
which has been made available to the Fund. The Fund
acknowledges that pursuant to such Terms and Conditions,
Xxxxxx Guaranty Brussels shall have the sole right to
exercise or assert any and all rights or claims in respect
of actions or omissions of, or the bankruptcy or
insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the
Fund's securities and other assets.
(i) Monitoring Responsibilities. The Bank shall furnish
annually to the Fund information concerning the Selected
Foreign Sub-Custodians employed hereunder for use by the
Fund in evaluating such Selected Foreign Sub-Custodians to
ensure compliance with the requirements of Rule 17f-5 of
the Act. In addition, the Bank will promptly inform the
Fund in the event that the Bank is notified by a Selected
Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will
decline below US$200 million (or the equivalent thereof)
or that its shareholders' equity has declined below US$200
million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any
other capital adequacy test applicable to it by exemptive
order, or if the Bank has actual knowledge of any material
loss of the assets of the Fund held by a Foreign
Sub-Custodian.
(j) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on
the Fund or the Bank as custodian of the Fund by the tax
laws of any jurisdiction, and it shall be the
responsibility of the Fund to notify the Bank of the
obligations imposed on the Fund or the Bank as the
custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and
other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole
responsibility of the Selected Foreign Sub-custodian with
regard to such tax law shall be to use reasonable efforts
to assist the Fund with respect to any claim for exemption
or refund under the tax law of jurisdictions for which the
Fund has provided such information.
14.4 Insurance. The Bank shall use the same care with respect to the safekeeping
of Portfolio Securities and cash of the Fund held by it as it uses in respect of
its own similar property but it need not maintain any special insurance for the
benefit of the Fund.
14.5. Fees and Expenses of the Bank. The Fund 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 Fund 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
18
reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement.
14.6 Advances by the Bank. The Bank may, in its sole discretion, advance funds
on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such payments
by the Fund. Should such a payment or payments, with advanced funds, result in
an overdraft (due to insufficiencies of the Fund'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 Fund payable on demand. Such
overdraft shall bear interest at the current rate charged by the Bank for such
loans unless the Fund shall provide the Bank with agreed upon compensating
balances. The Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness, in and to any
property at any time held by it for the Fund's benefit or in which the Fund 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 Fund
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 Fund on the Bank's books.
15. Limitation of Liability.
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 Fund or any third
party, and the Fund 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 solely from the negligence, willful
misfeasance or bad faith of the Bank or any Indemnified Party. 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;
(b) Any act or omission of any subcustodian selected by or
at the direction of the Fund;
(c) Any act or omission of a Selected Foreign
Sub-Custodian to the extent which such Selected Foreign
Sub-Custodian is not liable to the Bank;
(d) Any Corporate Action requiring a Response for which
the Bank has not received Proper Instructions or obtained
actual possession of all necessary 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 capital stock of the Fund or (ii)
the Yield Calculation; or
19
(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 Notwithstanding anything to the contrary in this Agreement, in no event
shall the Bank or the Indemnified Parties be liable to the Fund or any third
party for lost profits or lost revenues or any special, consequential, punitive
or incidental 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
"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 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 in the event the
other party violates any material provision of this
Agreement, provided that the non-violating party gives
written notice of such violation to the violating party
and the violating party does not cure such violation
within 90 days of receipt of such notice.
(b) Either party may terminate this Agreement during any
Renewal Term upon sixty days written notice to the other
party. Any termination pursuant to this paragraph 16.1(b)
shall be effective upon expiration of such sixty days,
provided, however, that the effective date of such
termination may be postponed to a date not more than
ninety 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 Fund held
hereunder; or (ii) at the request of the Fund, in order to
give the Fund 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
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund 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 Fund does not select a successor custodian within ninety (90) 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 Fund held by the Bank to a bank or trust company of the Bank's own selection
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 Fund 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
Fund with the same effect as though selected by the Board. Thereafter, the Bank
shall be released from any and all obligations under this Agreement.
20
16.3 Prior to the expiration of ninety (90) days after notice of termination has
been given, the Fund may furnish the Bank with an order of the Fund 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 Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund 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 Fund's Secretary and an opinion of
counsel to the Fund 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 Fund shall reimburse the Bank for any reasonable expenses incurred by
the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund may, upon
written request, have reasonable access to the records of the Bank relating to
its performance of its duties as custodian.
17. 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 low or in equal to an injunction or injunctions without bond or
other security to prevent breaches of this provision.
18. 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) had 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 Fund to:
Merrimac Series 000 Xxxxxxxxx Xxxxxx Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
(b) 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: Xxxx X. Xxxxx, General Counsel
or at such other place as such party may from time to time designate in writing.
19. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties.
21
20. Parties. This Agreement will be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns; provided,
however, that this Agreement will not be assignable by the Fund without the
written consent of the Bank or by the Bank without the written consent of the
Fund, 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.
21. 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.
22. 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.
23. 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.
24. Limitation of Liability. The Bank is hereby expressly put on notice of the
limitation of liability set forth in the Master Trust Agreement of the Fund and
agrees that the obligations assumed by the Fund hereunder shall be limited in
all cases to the assets of the Fund and that the Bank shall not seek
satisfaction of any such obligation from the officers, agents, employees,
trustees, or shareholders of the Fund.
25. Several Obligations of the Portfolios. This Agreement is an agreement
entered into between the Bank and the Fund with respect to each Portfolio. With
respect to any obligation of the Fund on behalf of any Portfolio arising out of
this Agreement, the Bank shall look for payment or satisfaction of such
obligation solely to the assets of the Portfolio to which such obligation
relates as though the Bank had separately contracted with the Fund by separate
written instrument with respect to each Portfolio.
22
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.
THE MERRIMAC SERIES
By: /s/ Xxxx X. Xxxxxxxx
----------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Treasurer and Chief
Financial Officer
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
Appendix B
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Portfolios
Merrimac Cash Series
Merrimac Treasury Series
Merrimac Short-Term Asset Reserve Series
