CUSTODY AGREEMENT
CUSTODY AGREEMENT dated as of January 18, 1990 among United States
Trust Company of New York, a New York corporation, as custodian (the
"Custodian"), Municipal Bond Investors Assurance Corporation (the
"Corporation"), Bear Xxxxxxx & Co., Inc. and Bear Xxxxxxx & Co., Inc. as
attorney in fact for Gruntal & Co., Incorporated (collectively the "Sponsor"),
and United States Trust Company of New York or any successor trustee, as trustee
(the "Trustee") for various series of the Insured Municipal Securities Trust,
New York Navigator Insured Series, sponsored by the Sponsor (the "Funds") each
such series consisting of one or more underlying separate unit investment
trusts.
RECITALS
A. The Sponsor has deposited and will deposit into each of the Funds
those obligations (the "Obligations") described in the appropriate schedule to
the related Reference Trust Agreement ("Trust Indenture") among the Sponsor and
the Trustee dated the date of deposit of each of the related Funds. Each of the
Funds will be specifically named and numbered and will be referred to herein
individually as a "Fund."
B. In accordance with the provisions hereof, the Trustee
will deliver to the Custodian for immobilization by the Custodian
all the Obligations deposited in any Fund as promptly as possible
after the deposit of such Obligations. The Sponsor and the
Trustee intend to permit the sale of any Obligation from the
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related Funds only as such Obligation has been immobilized as set
forth herein.
C. Upon the deposit of the Obligations in the related Funds, the
Corporation issues to the Trustee its Financial Guaranty Master Insurance Policy
(the "Master Policy") which insures the scheduled payments of principal and
interest to maturity on the Obligations.
D. Following the deposit with the Trustee of all the Obligations in a
Fund, the Trustee is to deposit with the Custodian, with respect to a particular
Fund, the Obligations and the related Master Policy to be held by the Custodian
in accordance with the provisions of this Custody Agreement. Such deposit and
holding shall be referred to herein as "Immobilization."
E. Upon completion of the Immobilization of all Obligations in a
particular Fund, the Custodian will deliver to the Corporation a confirmation in
the form attached hereto as Exhibit 1 (the "Confirmation"). The Corporation will
replace the related Master Policy with a Financial Guaranty Master Custodian
Policy relating to such immobilized Obligations issued to the Custodian (the
"Custodian Policy") substantially in the form attached hereto as Exhibit 2. The
Custodian Policy will guarantee the payments to the Custodian of regularly
scheduled principal of and interest on the immobilized Obligations. The coverage
provided by the Custodian Policy will be substantially similar to the coverage
provided by the Master Policy.
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F. It is understood by the parties hereto that the
function of the Custodian hereunder is purely ministerial in
nature.
Accordingly, the Sponsor, the Corporation, the Trustee and the
Custodian agree to the following terms to govern the custodial relationship
created hereby:
1. Immobilization of the Obligations and the Custodian Policies.
a. As soon as possible after the deposit of all
Obligations in a Fund, the Trustee will cause all
Obligations in such Fund to be delivered to the Custodian.
b. The parties agree that upon Immobilization of the
Obligations, a Custodian Policy will be issued to replace a related
Master Policy. Prior to the issuance of a Custodian Policy, the Trustee
will deliver to the Corporation and to the Custodian, via telecopy or
hand delivery, a completed Schedule pertaining to the Obligations which
the Trustee shall deliver to the Custodian for immobilization. The
Custodian will deliver to the Corporation and the Trustee a
Confirmation. If such Schedule and Confirmation are so delivered, the
Corporation will deliver the applicable Custodian Policy to the
Custodian in exchange for the applicable Master Policy, on the date
that the Obligations become subject to the Custody Agreement, which
date will be specified in the Schedule (the "Settlement Date");
provided that the Settlement Date will not occur earlier than the
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fourth Business Day next succeeding the date the Corporation receives
the appropriate Schedule. For purposes of this paragraph 1, the term
"Business Day" means any day of the year other than: (i) a Saturday or
a Sunday, (ii) a day on which the Corporation, the Custodian or the
Trustee are not open for business, or (iii) a day on which the New York
Stock Exchange is closed.
c. The Sponsor and the Trustee agree that all Obligations will
be deposited with the Custodian pursuant to this Custody Agreement on
the Settlement Date. The Trustee will deliver to the Custodian, on the
Settlement Date, if not already on deposit with the Custodian, (x) in
the case of Obligations which are not eligible for deposit with The
Depository Trust Company ("DTC"), the physical Obligations listed on
the Schedule in bearer form or duly endorsed in blank or accompanied by
all necessary instruments of assignment and transfer in blank, or (y)
in the case of Obligations which are DTC eligible, the Obligations by
credit to the account of the Custodian at DTC; and, where required by
the rules of the Municipal Securities Rulemaking Board, a Bond Interest
Advance check pursuant to such rules; and the Corporation will deliver
the applicable Custodian Policies in proper form to be held and the
proceeds thereof to be applied by the Custodian as herein provided. The
Custodian agrees to hold the Obligations and the applicable
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Custodian Policies in its custody subject to the terms of this Custody
Agreement.
d. On the Settlement Date, the Custodian will receive the
applicable Custodian Policy. The Custodian will issue to the
Corporation an acknowledgment substantially in the form annexed hereto
as Exhibit 3 (the "Acknowledgment") evidencing that the Obligations of
a particular issue and the Custodian Policy applicable thereto are in
its custody and are subject to this Custody Agreement. No
Acknowledgment will relate to more than one Custodian Policy.
e. (i) Upon delivery to the Custodian of the Obligations in
bearer form which by their terms are exchangeable for Obligations in
registered form, the Custodian shall, as soon as practicable, present
such Obligations to the registrar or transfer agent of the issuer of
such Obligations for registration or registration of transfer, as the
case may be, in the name of the Custodian or its nominee or endorsed by
the registered owner for transfer to the Custodian or its nominee; or
(ii) Upon delivery to the Custodian of Obligations in
bearer form which are not exchangeable for Obligations in
registered form, the Custodian shall hold such Obligations
in the form in which such Obligations were received.
2. Creation of Insured Position. The Custodian will, upon
receipt of the Obligations and the applicable Master Policy
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confirm that DTC has credited the account of the Custodian by the creation of a
book entry position at DTC (the "Book Entry Position") pursuant to the shipment
control list sent to the Custodian by DTC in substantially the form annexed
hereto as Exhibit 4. The account of DTC's nominee, CEDE & CO., will be credited
with payments due from time to time pursuant to a Standard Representation Letter
from the Custodian to DTC in the form annexed hereto as Exhibit 5. Each Book
Entry Position will evidence that Obligations of a single issue are in the
custody of the Custodian, and no Book Entry Position will relate to more than a
single issue of Obligations.
3. Rights of Related Beneficial Owners. The sole obligor with respect
to Obligations described in a Book Entry Position will be the issuer of such
Obligations (the "Issuer"). If the Issuer defaults on the payment of principal
of and/or interest on the Obligations each owner of a beneficial interest
created pursuant to that particular Book Entry Position (the "Related Beneficial
Owner") will have the right to proceed directly and individually against the
Issuer in whatever manner is deemed to be appropriate by the Related Beneficial
Owner, and will not be required to act in concert with the Custodian, DTC, CEDE
& CO., other Related Beneficial Owners or any other beneficial owner of an
interest created in any other Book Entry Position. The creation of a Book Entry
Position will not in any manner: (i) alter, modify or increase the rights of the
Related Beneficial Owner with respect to the Obligations to which such Book
Entry
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Position is applicable (provided that payments of principal of and interest on
the Obligations and proceeds of the applicable Custodian Policies will be paid
to the Related Beneficial Owner as provided herein), (ii) grant to any
beneficial owner of any other Book Entry Position rights with respect to the
Book Entry Position or the Obligations described in clause (i), or (iii) grant
to such Related Beneficial Owner rights with respect to any other Book Entry
Position or the Obligations to which such other Book Entry Position is
applicable. The parties hereto understand and agree that each Related Beneficial
Owner will hold title to its respective Obligations (but will have no interest
in Obligations or beneficial interests purchased by any other Related Beneficial
Owner), and that the Custodian will hold Obligations as bailee for the
applicable Related Beneficial Owners.
4. Obligations of the Custodian. During the term of this
Custody Agreement, the Custodian will have the following
obligations:
a. Custody of the Obligations and the Custodian Policies. The
Custodian will maintain custody of each Obligation and Custodian Policy
until the earlier to occur of: (i) payment of the Obligation in full,
including all accrued interest, on its respective stated maturity date,
(ii) payment under the Custodian Policy in full, including all accrued
interest, on the stated maturity date of the Obligation or (iii)
payment of the Obligation in full, together with
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all accrued interest, by the Issuer or, if applicable, under the
Custodian Policy on an earlier date on which the Obligation will have
been fully redeemed. All Obligations deposited with the Custodian
hereunder and all moneys relating thereto will be segregated by
separate recordation on the records of the Custodian so long as such
practice preserves a valid preference under applicable law, or if such
preference is not so preserved the Custodian will handle such
Obligations and moneys in such other manner as will constitute the
segregation and holding thereof in trust within the meaning of the
Investment Company Act of 1940. The Custodian may deposit Obligations
which are DTC eligible with DTC for the account of the Custodian. No
Obligation will be available to the Custodian for its own use or
profit, nor will any Obligation be deemed to be part of the general
assets of the Custodian. The Obligations will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of
the Custodian.
b. Payments of Interest and Principal. The Custodian will be
responsible for the collection of the interest on and principal of the
Obligations or any proceeds of the Custodian Policies in lieu thereof
and the remittance thereof to CEDE & CO. as the registered owner of a
Book Entry Position for payment of such proceeds by such registered
owner to the owners of beneficial interests in such Book Entry Position
or Book Entry Positions. The Custodian will remit payments of interest
or principal with respect to the Obligations to CEDE & CO., in next-day
funds or the equivalent, on each interest payment date in the case of
payments of interest and on the stated maturity date or
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such earlier date or dates on which the Obligations will have been
redeemed in the case of payments of principal.
c. Payments Under the Custodian Policies. The Custodian will
remit all proceeds received under the Custodian Policies representing
interest or principal with respect to the Obligations to CEDE & CO., in
next-day funds or the equivalent, on the day after the date the
Custodian actually receives such insurance proceeds.
d. Maintenance of Fidelity Bond. During the term hereof,
the Custodian will maintain a Banker's Blanket Bond in accordance
with its policies and any requirements of law.
5. Limitation on the Rights and Duties of the Custodian. The Custodian
will exercise only the duties expressly required or permitted by this Custody
Agreement, which duties are intended to be ministerial in nature only. The
Custodian will not: (i) assert the rights and privileges of any Related
Beneficial Owner unless the Custodian has been specifically requested to do so
by such Related Beneficial Owner, and the Custodian, at its sole option, agrees
to take such action, (ii) guarantee or increase the security for the Obligations
(as insured by the applicable Custodian Policies), or (iii) in any manner act in
a management capacity with respect to the Obligations.
6. Payments to the Corporation and the Funds. Neither the
Corporation nor any Fund will derive any compensation solely as a
result of the deposit of Obligations with the Custodian. The Corporation will
not be obligated to make any payments to any party (except as otherwise
expressly agreed to in writing by the Corporation and the Custodian) in
connection with such deposit of Obligations or the custodial relationship
established pursuant to this Custody
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Agreement except in accordance with the terms of the applicable Custodian
Policies.
7. Termination of the Custodian's Obligations; Appointment of Successor
Custodian. The obligations of a particular custodian hereunder may be terminated
by either the Custodian or the Sponsor (except as otherwise provided in this
paragraph 7) sixty (60) days after the receipt of written notice of termination
from the Custodian or the Sponsor, as the case may be, specifying in detail the
reason for such termination, which notice will be addressed to the Sponsor or
the Custodian, as the case may be, upon the failure of the other party fully to
perform any of its material obligations hereunder; provided that if such failure
to perform is cured to the reasonable satisfaction of the non-defaulting party
within such sixty (60) day period, such obligations will not be so terminated.
Copies of such notice will be given to the Corporation and the Trustee on the
same date that the notice is given to the defaulting party. To the extent
permitted by applicable law, the Corporation will have the right, but not the
obligation, to cure any such failure to perform by the defaulting party. In the
event a written notice of termination has been received by the applicable party,
the Custodian will not have any obligation to accept the deposit of any
additional Obligations unless and until such time as the failure to perform
specified in the notice is cured as provided above. The Custodian will, in any
case, retain all Obligations and the Custodian Policies which were subject to
this Custody Agreement as of the date of receipt of such notice by the
applicable party and will continue to perform its obligations hereunder with
respect to such Obligations and Custodian Policies until such time as: (i) a
successor custodian is appointed by the
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Sponsor, with the prior written consent of the Corporation and the Trustee, and
(ii) such successor custodian accepts such appointment. If the Sponsor, the
Corporation and the Trustee cannot reach an agreement on the selection of a
successor custodian by the ninetieth (90th) day following receipt of the notice,
the Corporation, the Trustee and the Sponsor will petition a New York court of
competent jurisdiction for the appointment of a successor custodian and such
court may thereupon appoint such successor custodian. Termination of the
obligations of a particular custodian pursuant to this paragraph 7 will not be
deemed to terminate any Custodian Policy.
8. Resignation of the Custodian. The Custodian may resign with respect
to all of its duties hereunder at any time by written notice thereof delivered
to the Corporation, such resignation to take effect upon the appointment of a
successor custodian pursuant to the provisions of Section 10 hereof; provided,
however, that in the event of such resignation, the Custodian shall (a) assist
the Corporation in its efforts to identify a successor custodian and (b) assist
the Corporation in its negotiations with such proposed successor custodian
regarding the fees and expenses to be charged by the successor custodian.
9. Termination of the Custody Agreement and all
Oblig-ations of all Parties Hereto. This Custody Agreement
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and the obligations of the parties hereto will terminate, as regards any one or
more Obligations and the related Book Entry Position or Book Entry Positions,
upon the maturity or final redemption of all of the Obligations, or the payment
of all of the proceeds under the Custodian Policies in lieu of payment in full
of all such Obligations, including all accrued interest, by the respective
Issuers. This Custody Agreement and the custodial relationship created hereby,
including all obligations of the parties hereto, will be terminated upon the
mutual written consent of the parties hereto, in accordance with and subject to
the terms of such written consent.
10. Appointment of Successor Custodian. If this Custody Agreement
is terminated by written agreement pursuant to Section 7 hereof, or if the
Custodian resigns pursuant to Section 8 hereof, a successor custodian will be
appointed as follows: a. The Sponsor will, within 60 days after delivery of the
notice of resignation or notice of termination, appoint a successor custodian.
If no successor custodian has been appointed within 60 days, the Custodian may
petition any court of competent jurisdiction for the appointment of a successor
custodian. In such case, the Custodian's resignation
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shall not become effective until the appointment of such successor custodian.
b. Any successor custodian (i) will be a corporation organized
and doing business under the laws of the United States or the State of
New York, which is authorized under such laws to exercise corporate
trust powers, and which is a participant in DTC, (ii) will have an
aggregate capital, surplus, and undivided profits of not less than
$50,000,000, and (iii) will have its principal office and place of
business in the Borough of Manhattan, the City and State of New York.
c. The Custodian will deliver to its successor the
Obligations, the related Custodian Policies and any documentation
related to them or to the Book Entry Positions and will remit to the
successor custodian any payments received by the Custodian with respect
to such Obligations, Custodian Policies or Book Entry Positions and any
unamortized fees. The retiring Custodian shall, upon payment of its
fees and charges, duly assign, transfer and deliver to such successor
custodian, the Custodian Policy and all records, Obligations and moneys
held by such retiring Custodian pursuant to the terms of this Custody
Agreement. Any successor custodian appointed hereunder will execute,
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acknowledge and deliver to its predecessor and to the Corporation an
instrument in writing accepting such appointment, and thereupon such
successor, without any further act, will become fully vested with all
the rights, duties and obligations of its predecessor.
d. The successor Custodian shall send notice of
its appointment to each Beneficial Owner within 10 days
of such appointment.
11. Governing Law. This Custody Agreement will be governed by and
construed in accordance with the laws of the State of New York.
12. Amendment of Agreement. The Corporation and the Custodian may
enter into any amendments, modifications or supplements to this Custody
Agreement, without the consent of the Beneficial Owners of Book Entry
Positions, which will not adversely affect the interest of any such Beneficial
Owner. This Custody Agreement may not be amended, changed, modified, altered or
terminated without the written consent of all of the parties hereto.
13. Limitations on Assignment; Delegation. The rights and obligations
of the parties hereunder may not be assigned or delegated without the prior
written consent of the other parties hereto.
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14. Limitations on Transfer of Obligations. Title to Obligations
will not be transferred except in accordance with this Custody Agreement
and the Standard Representation Letter and the shipment control list.
15. Severability. In the event any provision of this Custody Agreement
is held invalid or unenforceable by any court of competent jurisdiction, such
holding will not invalidate or render unenforceable any other provision hereof.
16. Further Assurances and Corrective Instruments. To the extent
permitted by law, the parties hereto agree that they will, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements hereto and such further instruments to which they
mutually agree in writing, as may reasonably be required for carrying out the
intention of or facilitating the performance of this Custody Agreement.
17. Liability of Custodian. The Custodian will not be liable to any
person for the performance of its duties hereunder except liability which is
adjudicated by a court of competent jurisdiction to have arisen from its gross
negligence, bad faith or willful misconduct in connection with the performance
of its duties hereunder.
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18. Notices. Any notice hereunder will be in writing and will be duly
given if delivered to the Sponsor at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
or at such other address as may be specified by the Sponsor to the Custodian,
the Corporation and the Trustee in writing, or to the Trustee at its unit trust
office, 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: UIT Administration,
or at such other address as may be specified by the Trustee to the Sponsor, the
Corporation and the Custodian in writing, or to the Custodian at its unit trust
office, 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Unit Trust Division,
or at such other address as may be specified by the Custodian to the
Corporation, the Trustee and the Sponsor in writing or to the Corporation at 000
Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx 00000, Attention: Manager, Documentation and
Closing, or at such other address as may be specified by the Corporation to the
Sponsor, the Custodian and the Trustee in writing.
19. Counterparts. This Custody Agreement may be
executed in several counterparts, each of which will be an
original and all of which together will constitute but one
and the same instrument.
IN WITNESS WHEREOF, Bear Xxxxxxx & Co., Inc., as Sponsor, and as
attorney in fact for Gruntal & Co., Incorporated has caused this Custody
Agreement to be executed on its
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behalf by one of its Vice Presidents, and its corporate seal to be hereto
affixed by one of its Assistant Secretaries; United States Trust Company of New
York, as Custodian, has caused this Custody Agreement to be executed on its
behalf by one of its Assistant Vice Presidents and its corporate seal to be
hereto affixed by one of its Assistant Secretaries; Municipal Bond Investors
Assurance Corporation, as insurer, has caused this Custody Agreement to be
executed on its behalf by one of its duly authorized officers and attested to by
one of its duly authorized officers; and United States Trust Company of New
York, as Trustee, or any successor trustee, has caused this Custody Agreement to
be executed on its behalf by one of its duly authorized officer Senior Vice
Presidents or Vice Presidents and its corporate
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seal to be hereto affixed by one of its Assistant Secretaries, all as of
the date first written above.
BEAR XXXXXXX & CO., INC., a Sponsor (Seal)
By
-----------------------------------------
Attest: Managing Director
By
--------------------------
Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, Custodian
(Seal)
By
----------------------------------------
Attest: Assistant Vice President
By
--------------------------
Assistant Secretary
UNITED STATES TRUST COMPANY OF
NEW YORK, Custodian
(Seal)
By
----------------------------------------
Attest: Assistant Vice President
By
--------------------------
Assistant Secretary
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MUNICIPAL BOND INVESTORS
ASSURANCE CORPORATION
By
-----------------------------------------
Attest: President
By
--------------------------
Assistant Secretary
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BEAR XXXXXXX & CO., INC.,
Attorney in Fact for Gruntal & Co.,
Incorporated
(Seal)
By
-----------------------------------------
Attest: Managing Director
By
--------------------------
Vice President
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