Exhibit 8(b)
SPECIAL CUSTODY ACCOUNT AGREEMENT
(Short Sales)
AGREEMENT (hereinafter "Agreement") dated as of August 18, 1995, by and
among Wilmington Trust Company in its capacity as custodian hereunder (the
"Bank"), each series of The Xxxxxxx Funds, each of which shall be considered a
separate party to this Agreement and each of which shall be known as the
"Customer" and Bear, Xxxxxxx Securities Corp. (the "Broker").
WHEREAS, Broker is a securities broker-dealer and is a member of several
national securities exchanges; and
WHEREAS , Customer is a registered investment company which desires from
time to time to execute various security transactions, including short sales
(which is permitted by Customer's investment policies), and in connection
therewith has executed Broker's Professional Account Agreement (the "Customer
Agreement") which provides for margin transactions; and
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Broker with the provisions of Regulation T of the Board of
Governors of the Federal Reserve System and other applicable requirements
("Margin Rules"); and
WHEREAS, to assist Broker and Customer in complying with the Margin
Rules, Bank is prepared to act as custodian to hold Collateral as defined
below.
NOW THEREFORE, be it agreed as follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
(a) "Adequate Margin" in respect of short sales shall mean such
collateral as is adequate in Broker's reasonable judgment under
the Margin Rules and the internal policies of Broker.
(b) "Advice from Broker" or "Advice" means a written notice sent to
Customer and Bank or transmitted by a facsimile sending device,
except that Advice for initial or additional Collateral or with
respect to Broker's ability to effect a short sale for the
Customer may be given orally. With respect to any short sale
or Closing Transaction, the Advice from Broker shall mean a
standard confirmation in use by Broker and sent or transmitted
to Customer and Bank. With respect to substitutions or
releases of Collateral, Advice from Broker means a written
notice signed by Broker and sent or transmitted to Customer and
Bank. An authorized agent of Broker will certify to Customer
and Bank the names and signatures of those employees who are
authorized to sign Advice from Broker, which certification may
be amended from time to time. When used herein, the term
"Advise" means the act of sending an Advice from Broker.
(c) "Closing Transaction" is a transaction in which Customer
purchases securities which have been sold short.
(d) "Collateral" shall mean cash or U.S. Government securities or
other securities acceptable to Broker.
(e) "Custody Agreement" shall mean the agreement for general
custodial services between the Bank and Customer.
(f) "Insolvency" means that (A) an order, judgment or decree has
been entered under the bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law (herein called the "Bankruptcy law")
of any competent jurisdiction adjudicating the Customer
insolvent; or (B) the Customer has petitioned or applied to any
tribunal for, or consented to the appointment of, or taking
possession by, a trustee, receiver, liquidation or similar
official, of the Customer, or commenced a voluntary case under
the Bankruptcy Law of the United States or any proceedings
relating to the Customer under the Bankruptcy Law of any other
competent jurisdiction, whether now or hereinafter in effect;
or (C) any such petition or application has been filed, or any
such proceedings commenced, against the Customer and the
Customer by any act has indicated its approval thereof, consent
thereto or acquiescence therein, or an order for relief has
been entered in an involuntary case under the Bankruptcy Law of
the United States, as now or hereinafter constituted, or an
order, judgment or decree has been entered appointing any such
trustee, receiver, liquidation or similar official, or
approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than
60 days.
(g) "Instructions from Customer" or "Instructions" means a request,
direction or certification in writing signed by Customer and
delivered to Bank and Broker or transmitted by a facsimile
sending device. An officer of Customer will certify to Bank
and Broker the names and signatures of those persons authorized
to sign the instructions, which certification may be amended
from time to time. When used herein, the term "Instruct" shall
mean the act of sending an Instruction from Customer.
(h) "Receipt of Payment" means receipt by Bank, of (1) a certified
or official bank check or wire transfer to Bank; (2) a written
or telegraphic advice from a registered clearing agency that
funds have been or will be credited to the account of Bank; or
(3) a transfer of funds from any of Broker's accounts
maintained at Bank.
(i) "Receipt of Securities" means receipt by Bank, of (1)
securities in proper form for transfer; or (2) a written or
telegraphic advice from a registered clearing agency that
securities have been credited to the account of Bank for the
Special Custody Account.
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(j) "Special Custody Account" shall have the meaning assigned to
that term in Section 2 hereof.
2. SPECIAL CUSTODY ACCOUNT
(a) Opening Custody Account. Bank shall open an account on its
books entitled "Special Custody Account for Bear, Xxxxxxx
Securities Corp. as Pledgee of Xxxxxxx Financial Alert Fund"
("Special Custody Account") and shall hold therein all
securities and similar property as shall be received and
accepted by it therein pursuant to this Agreement. Customer
agrees to instruct Bank in Instructions from Customer as to
cash and specific securities which Bank is to identify on its
books and records as pledged to Broker as Collateral in the
Special Custody Account. Customer agrees that the value of
such cash and securities shall be at least equal in value to
what Broker shall initially and from time to time advise
Customer in an Advice from Broker as being necessary to
constitute Adequate Margin. Such Collateral (i) will be held
by Bank for Broker as agent of Broker, (ii) may be released
only in accordance with the terms of this Agreement, and (iii)
except as required to be released hereunder to Broker, shall
not be made available to Broker or any other person claiming
through Broker, including the creditors of the Broker. In the
event The Xxxxxxx Funds wish to open another Special Custody
Account for another series of The Fund pursuant to this
Agreement, the title of the said account shall be appended
hereto as a schedule to this Agreement.
(b) Security Interest. Customer hereby grants a continuing
security interest to Broker in the Collateral in the Special
Custody Account. To perfect Broker's security interest, Bank
will hold the Collateral in the Special Custody Account,
subject to the interest therein of Broker as the pledgee and
secured party thereof in accordance with the terms of this
Agreement. Such security interest will terminate at such time
as Collateral is released as provided herein. Bank shall have
no responsibility for the validity or enforceability of such
security interest.
(c) Confirmation. Bank will confirm in writing to Broker and
Customer all pledges, releases or substitutions of Collateral
and will supply Broker and Customer with a monthly statement of
Collateral and transactions in the Special Custody Account for
such month. Bank will also advise Broker upon request of the
kind and amount of Collateral pledged to Broker.
(d) Excess Collateral. Upon the request of Customer, Broker shall
advise Bank Customer of any excess of Collateral in the Special
Custody Account. Such exces shall at Customer's request be
transferred therefrom upon Advice from Broker.
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(e) Accounts and Records. Bank will maintain accounts and records
for the Collateral in the Special Custody Account as more fully
described 'm sub-paragraph 5 below. The Collateral shall at
all times remain the property of the Customer subject only to
the extent of the interest and rights therein of Broker as the
pledgee thereof.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
(a) Short Sales. From time to time, Customer may place orders with
Broker for the short sale of securities. Prior to the
acceptance of such orders Broker will advise Customer of
Broker's ability to borrow such securities or other properties
an acceptance of short sale orders will be contingent upon
same.
(b) Open Short Sales Balance,. Broker shall, based on the closing
market price on first business day of each week, compute the
aggregate net credit or debit balance o Customer's open short
sales and advise Customer and/or Customer's designated agent by
11:00 A.M. New York time on the following business day
"Determination Day") of the amount of the net debit or credit,
as the case may be. a net debit balance exists on the
Determination Day, Customer will cause an amount equal to such
net debit balance to be paid to Broker by the close of business
on Determination Day. If a net credit balance exists on the
Determination Day, Broker shall pay such credit balance to
Customer by the close of business on Determination Day. As
Customer's open short positions are marked-to-market e week,
payments will be made by or to Customer to reflect changes (if
any) in credit or debit balances. Broker will charge interest
on debit balances, and Broker will pay interest on credit
balances. Balances V4'11 be appropriately adjusted w short
sales are closed out. A business day shall be any day on which
Broker is op for regular business. If the Determination Day
shall occur on a holiday, Saturday Sunday, then the
Determination Day shall be the next Xxxx on which the Broker
4. PLACING ORDERS
It is understood and agreed that Customer. when placing with Broker
any order to sell s for Customer's account. will designate the order
as such and hereby authorizes Broker to xxxx s order as being
"short", and when placing with Broker any order to sell long for
Customer's account will designate the order as such and hereby
authorizes Broker to xxxx such order as being "long". Any sell
order which Customer shall designate as being for long account as
above provided is for securities then owned by Customer and, if such
securities are not then deliverable by Broker from any account of
Customer, the placing of such order shall constitute a
representation by Customer that it is impracticable for Customer
then to deliver such securities to Broker but that Customer shall
deliver them by the settlement date or as soon as possible
thereafter.
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5. RIGHTS AND DUTIES OF THE BANK
(a) Generally. The Bank shall receive and hold in the Special
Custody Account, as custodian upon the terms of this Agreement,
all Collateral deposited and maintained pursuant to the terms
of this Agreement and, except as provided in sub-paragraph 5(b)
below, shall receive and hold all monies and other property
paid, distributed or substituted in respect of such Collateral
or realized on the sale or other disposition of such
Collateral; provided, however, that the Bank shall have no duty
to require any money or securities to be delivered to it or to
determine that the amount and form of assets delivered to it
comply with any applicable requirements. Collateral held in
the Special Custody Account shall be released only in
accordance with this Agreement or as required by applicable
law. The Customer grants its authority to deposit in such
account any money, securities and other property received by
the Bank. The Bank may hold the securities in the Special
Custody Account in bearer, nominee, book entry, or other form
and in a depository or clearing corporation, with or without
indicating that the securities are held hereunder; provided,
however, that all securities held in the Special Custody
Account shall be identified on the Bank's records as subject to
this Agreement and shall be in a form that permits transfer
without additional authorization or consent of the Customer.
The Customer and Broker hereby agree to hold the Bank and its
nominees harmless from any liability as holder of record.
(b) Dividends and Interest. Any dividends or interest paid with
respect to the Collateral held in the Special Custody Account
shall be paid by the Bank to the Customer when collected unless
the Bank has received contrary Instructions from the Customer.
(c) Reports. The Bank shall, as promptly as practical, provide
Broker and the Customer and/or Customer's designated agent with
written confirmation of each transfer into and out of the
Special Custody Account. The Bank also shall render to the
Broker and the Customer and/or Customer's designated agent a
monthly statement of the Collateral held in the Special Custody
Account. In addition, the Bank will advise the Broker and the
Customer and/or Customer's designated agent, upon request of
the Broker or Customer, at any time of the type and amount of
Collateral held in the account; provided, however, that the
Bank shall have no responsibility for making any determination
as to the value of such Collateral.
(d) Limitation of Bank's Liability. The Bank's duties and
responsibilities are set forth in this Agreement. The Bank
shall act only upon receipt of Advice from Broker regarding
release or substitution of Collateral. The Bank shall not be
liable or responsible for anything done, or omitted to be done
by it in good faith and in the absence of negligence and may
rely and shall be protected in acting upon any notice,
instruction or other communication which it reasonably believes
to be genuine and authorized. As between the Bank and Broker,
Broker shall indemnify and hold the Bank harmless with regard
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to any losses or liabilities of the Bank (including counsel
fees) imposed on or incurred by the Bank arising out of any
action or omission of the Bank in accordance with any Advice,
notice or instruction of Broker under this Agreement. In
matters concerning or relating to this Agreement, the Bank
shall not be responsible for compliance with any statute or
regulation regarding the establishment or maintenance of margin
credit, including but not limited to Regulations T or X of the
Board of Governors of the Federal Reserve System, or with any
rules or regulations of the Office of the Controller of the
Currency (or the Securities and Exchange Commission). The Bank
shall not be liable to any party for any acts or omissions of
the other parties to this Agreement.
(e) Compensation. Bank shall be paid as compensation for its
services pursuant to this Agreement such compensation as may
from time to time be agreed upon in writing between Customer
and Bank.
6. DEFAULT
In the event of a default by Customer of its obligations (i) to
maintain Adequate Margin as herein provided, (ii) to timely comply
with any obligation on Customer's part to be performed or observed
under this Agreement or in the Customer Agreement, (iii) to pay on
demand by Broker any losses sustained by Broker as may occur under
circumstances contemplated in paragraph 3 above; or (iv) in the
event of Customer's Insolvency, Broker has the right to give notice
(which notice may be by telegraph, facsimile transmission or hand
delivery) to Customer specifying such default and Broker may, no
sooner than 2:00 P.M., New York time on the next business day after
giving such notice to Customer, if Customer continues to be in
default or insolvent at the end of such period, effect a Closing
Transaction or buy-in of any securities of which Customer's account
may be short. In the event of a default specified in subparagraphs
(i), (ii) or (iii) above, Broker shall also have the right, upon
like notice and grace period, to sell any and all Collateral in the
Special Custody Account and to give Advice to Bank to deliver such
Collateral free of payment to Broker, which Advice shall state that,
pursuant to this Agreement, the condition precedent to Broker's
right to receive such Collateral free of payment has occurred. The
Bank will provide prompt telephone notice to Customer of any receipt
by Bank of Advice from Broker to deliver collateral free of payment,
and shall promptly effect delivery of Collateral to Broker. Such
sale or purchase may be made according to Broker's judgment and may
be made at Brokers discretion, on the principal exchange or other
market for such securities, or in the event such principal market is
closed, in a manner commercially reasonable for such securities.
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7. LIMITATION OF BROKER LIABILITY
Broker shall not be liable for any losses, costs, damages,
liabilities or expenses suffered or incurred by Customer as a result
of any transaction executed hereunder, or any other action taken or
not taken by Broker hereunder for Customer's account at Customer's
direction or otherwise, except to the extent that such loss, cost,
damage, liability or expense is the result of Broker's own
recklessness, willful misconduct or bad faith.
8. CUSTOMER REPRESENTATION
Customer represents and warrants that the Collateral will not be
subject to any other liens or encumbrances.
9. TERMINATION
Any of the parties hereto may terminate this Agreement by notice in
writing to the other parties hereto; provided, however, that the
status of any short sales, and of Collateral held at the time of
such notice to margin such short sales shall not be affected by such
termination until the release of such Collateral pursuant to
applicable law or regulations or rules of any self regulatory
organization to which the Broker is subject. In the event of the
release of Collateral, the Collateral shall be transferred to a
proper custody account of the Customer in the Bank.
10. NOTICE
Written communications hereunder shall be telegraphed, sent by
facsimile transmission or hand delivered as required herein, when
another method of delivery is not specified, may be mailed first
class postage prepaid, except that written notice of termination
shall be sent by certified mail, addressed:
(a) if to Bank, to:
Wilmington Trust Company
Xxxxxx Square North
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xx 00000
Attn: Corporate Custody
Phone: 000-000-0000
Facsimile: 000-000-0000
(b) if to Customer, to:
The Xxxxxxx Funds
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxx Xxxxxx, X.X. 00000
Attention: Xxxxxx Xxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
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(c) if to Broker, to:
Bear, Xxxxxxx Securities Corp.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx, Treasurer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
11. CONTROLLING LAW
The construction and enforcement of this Agreement shall be subject
to and governed by the laws of the State of New York.
12. THE AGREEMENT CONTROLS/AMENDMENTS
Customer and Bank agree that the terms of this Agreement shall
supplement and amend the Custody Agreement dated as of August 18,
1995 between the Bank and the Customer with respect to the Special
Custody Account identified on page 3 hereof, and to the extent
inconsistent therewith, the terms of this Agreement shall control.
No amendment of this Agreement shall be effective unless in writing
and signed by an authorized officer of each Broker, Customer and
Bank.
IN WITNESS WHEREEOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
The Xxxxxxx Funds
By: /s/ Xxxxxx X. Xxxxxxx
Title: President
Wilmington Trust Company
By: /s/ Lario X. Xxxxxx
Title: Vice President
Bear, Xxxxxxx Securities Corp.
By: /s/ Xxxxxxx Xxxxxxx
Title: Treasurer
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