Exhibit 2.j
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this ____ day of ___ 1997 by and
between The Bank of New York, a New York banking corporation (the "Custodian"),
and Xxxxxxx X. Xxxxxx III, Xxxxx X. X'Xxxxx and Xxxxxx X. Xxxxxxx (collectively,
the "Trustees"), not in their individual capacities but solely as Trustees of
Reader's Digest Automatic Common Exchange Security Trust (the "Trust"), a trust
organized under the laws of the State of New York, under and by virtue of an
Amended and Restated Trust Agreement, dated as of ___ __, 1997 (the "Trust
Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold certain U.S. treasury
securities (the "Treasury Securities"), to enter into and hold forward purchase
contracts (the "Contracts") with one or more existing shareholders of The
Reader's Digest Association, Inc. (the "Company"), and to issue Trust Automatic
Common Exchange Securities (the "Securities") in accordance with the terms and
conditions of the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the Custodian to
perform certain custodial duties for the Trust; and
WHEREAS, the Custodian is qualified and willing to assume such duties,
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the respective meanings specified in the Trust Agreement.
2. Appointment of Custodian; Transfer of Assets. The Trustees hereby
constitute and appoint the Custodian, and the Custodian accepts such
appointment, as custodian of all of the property, including but not limited to,
the Contracts, the Treasury Securities, the Temporary Investments, any cash and
any other property at any time owned or held by the Trust (collectively, the
"Assets"). The
Trustees hereby deposit the Assets with the Custodian and the Custodian hereby
accepts such into its custody and the Trustees shall deliver to the Custodian
all of the Assets, including all monies, securities and other property received
by the Trust at any time during the period of this Agreement, subject to the
following terms and conditions. The Custodian hereby agrees that it shall hold
the Assets in a segregated custody account, separate and distinct from all other
accounts, in accordance with Section 17(f) of, and in such manner as shall
constitute the segregation and holding in trust within the meaning of, the
Investment Company Act and the rules and regulations thereunder. The Trustees
authorize the Custodian, for any Assets held hereunder, to use the services of
any United States securities depository permitted to perform such services for
registered investment companies and their custodians under Rule 17f-4 under the
Investment Company Act and which have been approved by the Trustees, including
but not limited to, the Depository Trust Company and the Federal Reserve Book
Entry System. The Custodian shall invest monies on deposit in such custody
account in the Temporary Investments in accordance with Section 3.5 of the Trust
Agreement. Except as otherwise specifically provided in the Trust Agreement, the
Custodian shall not have the power to sell, transfer or otherwise dispose of any
Temporary Investments prior to the maturity thereof, or to acquire additional
Temporary Investments. The Custodian shall hold any Temporary Investments to
maturity and shall apply (or cause to be applied) the proceeds thereof paid upon
maturity to the payment of the next succeeding Quarterly Distribution. All such
Temporary Investments shall be selected by the Trustee from time to time or
pursuant to standing instructions from the Trustees, and the Custodian shall
have no liability to the Trust or any Holder or any other Person with respect to
any such Temporary Investments.
3. Asset Disposition; Examinations. The Custodian shall have no power
or authority to assign, hypothecate, pledge or otherwise dispose of the Assets,
except pursuant to a written direction in accordance with paragraph 4 below and
then only for the account of the Trust. The Assets shall be subject to no lien
or charge of any kind in favor of the Custodian for itself or for any other
Person claiming through the Custodian. The Custodian shall permit actual
examination of the Assets by the Trust's independent public accountant at the
end of each annual and semi-annual fiscal period of the Trust and at least one
other time during the fiscal year of the Trust chosen by such independent public
accountant and shall permit the inspection of the Assets by the Commission
through its employees or agents during the
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normal business hours of the Custodian upon reasonable request.
4. Authorized Actions. The Custodian shall take such actions with
respect to the Assets as directed in writing by the Trustees or by any officer
of the Administrator as may be received by the Custodian from time to time.
5. Custodian's Actions Taken In Good Faith. In connection with the
performance of its duties under this Agreement, the Custodian shall be under no
liability to the Trust or any Holder for any action taken in good faith in
reliance on any paper, order, certification, list, demand, request, consent,
affidavit, notice, opinion, direction, endorsement, assignment, resolution,
draft or other document, prima facie properly executed, or for the disposition
of the Assets pursuant to the Trust Agreement or in respect of any action taken
or suffered under the Trust Agreement in good faith, in accordance with an
opinion of counsel or at the direction of the Trustees pursuant hereto; provided
that this provision shall not protect the Custodian against any liability to
which it would otherwise be subject by reason of its reckless disregard of its
obligations and duties hereunder. Notwithstanding any other provision of this
Agreement, the Custodian shall under no circumstances be liable for any indirect
or consequential damages.
6. Trust Agreement Validity. The Custodian shall not be responsible for
the validity or sufficiency of the Trust Agreement or the due execution thereof,
or for the form, character, genuineness, sufficiency, value or validity of any
of the Assets and the Custodian shall in no event assume or incur any liability,
duty or obligation to any Holder or to the Trustees, other than as expressly
provided for herein. The Custodian shall not be responsible for or in respect of
the validity of any signature by or on behalf of the Trustees.
7. Litigation Obligations, Costs and Indemnity. The Custodian shall not
be under any obligation to appear in, prosecute or defend any action which in
its opinion may involve it in expense or liability, unless it shall be furnished
with such reasonable security and indemnity against such expense or liability as
it may require, and any pecuniary costs of the Custodian from such actions shall
be expenses which are reimbursable pursuant to paragraph 13 hereof.
8. Taxes; Trust Expenses. In no event shall the Custodian be personally
liable for any taxes or other
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governmental charges imposed upon or in respect of the Assets or upon the
monies, securities or other properties included therein. The Custodian shall be
reimbursed and indemnified by the Trustees for all such taxes and charges, for
any tax or charge imposed against the Trust and for any expenses, including
counsel fees, interest, penalties and additions to tax which the Custodian may
sustain or incur with respect to such taxes or charges.
9. Custodian Resignation, Succession. (a) The Custodian may resign by
executing an instrument in writing resigning as Custodian and delivering the
same to the Trustees, not less than 60 days before the date specified in such
instrument when, subject to clause (b) of this paragraph 9, such resignation is
to take effect. Upon receiving such notice of resignation, the Trustees shall
use their reasonable efforts promptly to appoint a successor Custodian in the
manner and meeting the qualifications provided in the Trust Agreement, by
written instrument or instruments delivered to the resigning Custodian and the
successor Custodian.
(b) In case no successor Custodian shall have been appointed within 30
days after notice of resignation has been received by the Trustees, the
resigning Custodian may forthwith apply to a court of competent jurisdiction for
the appointment of a successor Custodian. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribed, appoint a successor
Custodian.
10. Custodian Removal. The Trustees may remove the Custodian upon 60
days' prior written notice to the Custodian and appoint a successor Custodian.
In case at any time the Custodian shall not meet the requirements set forth in
the Trust Agreement or shall become incapable of acting or if a court having
jurisdiction shall enter a decree or order for relief in respect of the
Custodian in an involuntary case, or the Custodian shall commence a voluntary
case, under any applicable bankruptcy, insolvency, or other similar law now or
hereafter in effect, or any receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) for the Custodian or for any substantial part
of its property shall be appointed, or the Custodian shall make any general
assignment for the benefit of creditors, or shall generally fail to pay its
debts as they become due, the Trustees may remove the Custodian immediately and
appoint a successor Custodian. The termination of the Administration Agreement
or the Paying Agent Agreement shall cause the removal of the Custodian
simultaneously therewith.
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11. Transfers to Successor Custodian. Upon the request of any successor
Custodian, the Custodian hereunder shall, upon payment of all amounts due it,
execute and deliver an instrument acknowledged by it transferring to such
successor Custodian all the rights and powers of the resigning Custodian; and
the resigning Custodian shall transfer, deliver and pay over to the successor
Custodian the Assets at the time held by it hereunder, if any, together with all
necessary instruments of transfer and assignment or other documents properly
executed necessary to effect such transfer and such of the records or copies
thereof maintained by the resigning Custodian in the administration hereof as
may be requested by the successor Custodian, and shall thereupon be discharged
from all duties and responsibilities hereunder. Any resignation or removal of
the Custodian shall become effective upon such acceptance of appointment by the
successor Custodian. The indemnification of the resigning Custodian provided for
hereunder shall survive any resignation, discharge or removal of the Custodian
hereunder.
12. Custodian Merger, Consolidation. Any corporation into which the
Custodian may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Custodian shall be a party, shall be the successor Custodian hereunder and
under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement
and provided further that the Trust has given its prior written consent to the
Custodian with respect to any such merger, conversion or consolidation.
13. Compensation; Expenses. The Custodian shall receive compensation
for performing the usual, ordinary, normal and recurring services under this
Custodian Agreement and, with the prior written approval of the Trustees,
reimbursement for any and all expenses and disbursements incurred hereunder, as
provided in Section 3.1 of the Administration Agreement.
14. Section 17(f) Qualification. The Custodian hereby represents that
it is qualified to act as a custodian under Section 17(f) of the Investment
Company Act.
15. Custodian's Limited Liability. The Trustees shall indemnify and
hold the Custodian harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
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and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of any
inaccuracy in information furnished to the Custodian by the Trustees, or any act
or omission in the course of, connected with or arising out of any services to
be rendered hereunder, provided that the Custodian shall not be indemnified and
held harmless from and against any such loss, damages, cost, expense, liability
or claim arising from its willful misfeasance, bad faith or gross negligence in
the performance of its duties, or its reckless disregard of its duties and
obligations hereunder. Neither the Federal Reserve Book Entry System nor the
Depository Trust Company shall be deemed to be agents of the Custodian.
16. Rights of Set-Off; Banker's Lien. The Custodian hereby waives all
rights of set-off or banker's lien it may have with respect to the Assets held
by it as Custodian hereunder.
17. Termination. This Agreement shall terminate upon the earlier of the
termination of the Trust or the appointment of a successor Custodian.
18. Choice of Law. This Agreement is executed and delivered in the
State of New York, and all laws or rules of construction of the State of New
York shall govern the right of the parties hereto and the interpretation of the
provisions hereof.
19. Notices. Any notice to be given to the Trust hereunder shall be in
writing and shall be duly given if mailed or delivered to Reader's Digest
Automatic Common Exchange Security Trust, c/o Xxxxxx X. Xxxxxxx, Managing
Trustee, Xxxxxxx & Associates, 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx
00000, and to the Custodian if mailed or delivered to The Bank of New York, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X. Xxxxx or at such
other address as shall be specified by the addressee to the other party hereto
in writing.
20. No Third Party Beneficiaries. Nothing herein, express or implied,
shall give to any Person, other than the Trustees, the Custodian and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
21. Amendments; Trust Agreement Changes; Waiver. This Agreement shall
not be deemed or construed to be modified, amended, rescinded, cancelled or
waived, in whole or in part, except by a written instrument signed by a duly
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authorized representative of the party to be charged. The Trustees shall notify
the Custodian of any change in the Trust Agreement prior to the effective date
of any such change. Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
22. Counterparts. This Agreement may be signed in counterparts with all
counterparts constituting one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Custodian
Agreement to be duly executed as of the day and year first above written.
TRUSTEES
__________________________
Xxxxxxx X. Xxxxxx III,
as Trustee
__________________________
Xxxxx X. X'Xxxxx,
as Trustee
__________________________
Xxxxxx X. Xxxxxxx,
as Trustee
THE BANK OF NEW YORK
By ______________________
Name:
Title:
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