The Prudential Insurance Company of America
Custody Agreement
THIS CUSTODY AGREEMENT ("Agreement"), dated as of September 16, 1996 is
entered into by and between INVESTORS FIDUCIARY TRUST COMPANY, a Missouri trust
company, having its trust office located at 000 Xxxx 00xx Xxxxxx, Xxxxxx Xxxx,
Xxxxxxxx 00000 ("Custodian"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a
New Jersey corporation, having its principal office and place of business at
Xxxxxxxxxx Xxxxx, Xxxxxx, Xxx Xxxxxx 00000 ("Client").
WHEREAS, Client desires to arrange for the custody of certain assets
belonging to separate accounts (each a "Separate Account" and collectively, the
"Separate Accounts") established and maintained by Client, which Separate
Accounts are registered as management, investment companies with the Securities
and Exchange Commission, with Custodian, and Custodian desires to provide such
custodial services, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
Custodian and Client agree as follows:
1. Definitions. The following terms, as used herein, shall have the
following meanings:
1.1. "Authorized Instruction" means a written, oral or electronic
communication accepted by Custodian in good faith that has been transmitted
subject to, and in accordance with, the Security Procedures or by such other
method as may be acceptable to, and approved in writing by, each of Custodian
and Client.
1.2. "Authorized Persons" means those persons who have been designated
and duly authorized by Client pursuant to all necessary corporate or other
action (which designation and authorization shall be evidenced by appropriate
documentation delivered to Custodian, upon which Custodian may conclusively
rely) to act on behalf of Client in connection with this Agreement and the
transactions contemplated hereby. A person so designated shall continue to be an
Authorized Person hereunder until such time as Client has delivered to Custodian
written notice of the revocation and termination of the authority of such person
to act for Client hereunder.
1.3. "Cash Account" has the meaning given at Section 5 of this
Agreement.
1.4. "Securities Account" has the meaning given at Section 3 of this
Agreement.
1.5. "Security Procedure" means, for any specified method of
communication, a procedure approved in writing by Custodian and Client for the
purpose of (i) verifying that an Authorized Instruction given pursuant to such
method of communication is that of Client, and/or (ii) detecting error in the
transmission or content of such Authorized Instruction.
1.6. "Securities Depository" means any of the securities depositories
or clearing systems listed at Schedule 1.6 hereto, as amended from time to time
in accordance with Sections 4.3.2 and 15 hereof.
1.7. "Security" means any share, stock, bond, debenture, note,
certificate of indebtedness, warrant, option or other security or other non-cash
investment property (whether represented by a certificate or by a book-entry on
the records of the issuer or other entity responsible for recording such
book-entries) that is from time to time held for the account of Client, directly
or indirectly, through a Securities Depository or by Custodian pursuant to this
Agreement.
2. Representations, Warranties and Covenants.
2.1. Authority. Client and Custodian each represent and warrant to the
other, as of the date hereof and continuing through termination of this
Agreement, that the execution, delivery and performance by them of this
Agreement (i) are within their respective corporate, trust and other
constitutive powers; (ii) have been duly authorized by all necessary corporate,
trust and other actions required by their respective constitutive documents;
(iii) require no action by or in respect of, or filing with, any governmental
body, agency or official; and (iv) do not contravene or constitute a default
under (a) any provision of applicable law or regulation, (b) their respective
constitutive documents, or (c) any agreement, judgment, injunction, order,
decree or other instrument by which they or their respective properties or
operations are bound.
2.2. Transfers. As of the date hereof and continuing through
termination of this Agreement, Custodian represents and warrants to Client that
Custodian shall hold, maintain and, as applicable, transfer all Securities in
the possession, custody or control of Custodian hereunder free and clear of any
proprietary or equitable interest of Custodian, except as otherwise agreed in
writing by Custodian and Client.
2.3. Margin. As of the date hereof and continuing through termination
of this Agreement, Client represents to Custodian that Client will not incur any
credit, advance or overdraft, with respect to any Cash Account (as hereinafter
defined) to purchase or carry any margin stock, as defined in Regulation U of
the Board of Governors of the Federal Reserve System, 12 C.F.R. Chapter II, as
amended.
2.4. Custodian Financial Condition. Custodian hereby represents and
warrants to Client that Custodian has, at the date hereof, a net worth of not
less than $20,000,000. During the term hereof, Custodian shall (i) regularly
furnish Client with true,
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correct and complete copies of Custodian's quarterly and annual financial
statements, when and as rendered, and (ii) provide Client with such other
interim financial statements and information pertaining to Custodian's then
current financial condition as reasonably may be requested by Client from time
to time for the purpose of confirming Custodian's continued solvency, net worth
and qualification to act hereunder.
3. Securities Accounts.
3.1. Establishment of the Securities Accounts. Client hereby
establishes with Custodian a securities account for each Separate Account
identified at Schedule 3.1 hereto (each a "Securities Account" and
collectively, the "Securities Accounts") in the manner and on the terms
specified herein.
3.2. Ownership and Identification. All Securities held directly or
indirectly in the Securities Accounts shall be held by Custodian for the
exclusive account and benefit of Client, and beneficial ownership of the
Securities shall at all times remain vested in Client. The books and records of
Custodian shall so identify the Securities and the Securities Accounts.
Custodian shall cause Client's interest in the Securities to be evidenced by a
credit to the Securities Accounts on the books of Custodian. Custodian shall
segregate on its books and records any securities which are held by it for
Custodian's own account from those securities (including the Securities) held by
it for the account of others. Notwithstanding anything stated in Section 8 of
this Agreement to the contrary, Custodian shall not be responsible for the
title, validity or genuineness of any Securities or evidence of the title
receive by it.
3.3. Right to Withdraw. Client shall at all times, and from time to
time, have the continuing, unqualified and unlimited right to withdraw all or
any portion of the Securities from the Securities Accounts immediately upon
demand; provided however, that any Securities designated in writing by Client as
being required to meet the deposit requirements of those insurance regulatory
authorities having jurisdiction (each, a "Regulatory Authority") shall, to the
extent required by law, be deemed held by Custodian under and subject to the
control of such Regulatory Authority, and shall not be withdrawn, or otherwise
disposed of, by or at the direction of Client without the prior written approval
of such Regulatory Authority, in a form reasonably acceptable to Custodian.
4. Terms of Custody.
4.1. Authority to Hold Securities. Subject to the terms and conditions
of this Agreement, Client hereby authorizes Custodian to hold Securities
received, from time to time, for the account of Client. Custodian may hold the
Securities directly or indirectly through Securities Depositories and
Sub-Custodians qualifying under Section 1.6 and this Section 4.
4.2. Directly Held Securities. Certificated Securities held hereunder
may be
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registered in the name of Custodian or a Sub-Custodian (as defined below) and
shall be maintained and held in vaults of Custodian's sub-custodian, State
Street Bank and Trust Company ("State Street"), located in Boston,
Massachusetts, or State Street's agent, Chemical Bank, located in New York, New
York or, in the case of certificated securities to be held outside the United
States, of the applicable foreign Sub-Custodian listed in Schedule 4.4.1.
4.3. Securities Depositories. Entities qualified to act as Securities
Depositories hereunder shall be limited to the following: (i) a depository that
provides for long-term immobilization of securities, or a clearing corporation
that is also a depository, in each case approved by, or registered with, the
Securities and Exchange Commission ("SEC") pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended; (ii) with respect to Treasury xxxx
and securities, a Federal Reserve Bank utilizing a book-entry system pursuant to
Subpart 0 of Treasury Circular No. 300 (or the book-entry regulations of Federal
agencies in substantially the same form), 31 C.F.R. Part 306 and Subpart B of 31
C.F.R. Part 350; (iii) an "eligible foreign custodian" that is a securities
depository ("Foreign Depository") under Rule 17f-5(c)(2) promulgated under the
Investment Company Act of 1940 (generally, an "SEC Rule"); (iv) as applicable,
such other entities (each, an "Other Entity") which Client determines are
approved to act as a qualified depository by the Regulatory Authorities,
provided that any such Other Entity located in the United States has been
registered with, or approved by, the SEC.
4.3.1. Schedule 1.6 Depositories. Client and Custodian herewith
stipulate and agree that the entities listed at Schedule 1.6 are qualified to
act as Securities Depositories under this Section 4.3.
4.3.2. Additional Depositories. If Custodian wishes to engage a
Securities Depository hereunder and such Securities Depository is not listed at
Schedule 1.6 (each, an "Additional Depository"), the engagement of such
Additional Depository shall be subject to, and shall require, Client's prior
written approval. Upon such approval, the Additional Depository shall be listed
by amendment to Schedule 1.6, in accordance with Section 15 hereof.
4.3.3. Foreign Depositories. With respect to Foreign
Depositories, Custodian shall continuously monitor the eligibility of the
Foreign Depositories and if, at any time, Custodian determines that any Foreign
Depository no longer satisfies the requirements of SEC Rule 17F-5(c)(2),
Custodian shall promptly provide written notice to Client and will act upon
Authorized Instructions.
4.3.4. Ownership and Identification. Custodian shall require each
Securities Depository to identify Securities held by the Securities Depository
as being held for the account of Custodian for its customers to the extent
permitted by the rules and procedures of such Securities Depository.
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4.3.5 No Commingling. Securities held by Custodian in accounts
with Securities Depositories hereunder shall not be commingled with securities
or other assets held by such Security Depository for the beneficial account and
interest of Custodian.
4.3.6. Securities Depository Liens. Custodian hereby represents,
warrants and covenants that it will permit a Securities Depository to hold
Securities hereunder, only if, and continuing for so long as (i) the Securities
are not subject to any right, charge, security interest, lien or claim of any
kind in favor of the Securities Depository or its creditors, including a
receiver, trustee in bankruptcy or similar authority, other than for final
settlement of Securities Transactions and (ii) beneficial ownership of the
Securities is freely transferable without the payment of money or value, in
either case other than for safe custody or administration.
4.3.7. Agency. A Securities Depository engaged under this Section
4.3 shall at all times be deemed the agent of Custodian. Custodian's deposit of
Securities with a Securities Depository shall not relieve Custodian of any of
Custodian's duties, obligations, responsibilities or liabilities under this
Agreement except as provided in Section 8.1.
4.4. Sub-custodian. To the extent permitted by law, Custodian is
authorized to engage State Street as a Sub-Custodian hereunder as well as
additional sub-custodians (which may be sub-custodians of State Street) to hold
Securities and cash necessary to effect Securities transactions in any
jurisdiction where a Security is required or otherwise directed by Client to be
held if Custodian does not have facilities for the deposit of Securities in such
jurisdiction (each, a "Sub-Custodian"), and to permit such Sub-Custodians to use
Securities Depositories in accordance with Section 4.3 hereof, as necessary for
such purpose. Sub-Custodians engaged to hold foreign securities, cash and cash
equivalents in accordance with SEC Rule 17f-5(a) shall be limited to "eligible
foreign custodian" under SEC Rule 17f-5(c)(2)(each a "Foreign Sub-Custodian").
4.4.1. Approval Required. Sub-Custodians engaged by Custodian
under this Section 4.4 shall be subject to, and shall require the prior written
approval of, Client. All Sub-Custodians approved at the time of this Agreement's
execution shall be listed in Schedule 4.4.1.
4.4.2. Ownership and Identification. All Securities held by a
Sub-Custodian hereunder shall be identified (i) on Custodian's books, as
belonging to Client and located at the Sub-Custodian, and (ii) on the
Sub-Custodian's books, as belonging to Custodian or State Street, as applicable,
for the account and beneficial interest of Custodian's customers or State
Street's customers, as applicable.
4.4.3. Commingled Accounts. Custodian may permit a Sub-Custodian
to commingle the Securities of Client with Securities of other sub-custodial
accounts held by the Sub-Custodian for the account of Custodian and other
customers of the Sub-Custodian; provided however, that under no circumstances
shall any such sub-custodial account
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commingle Securities of Client with securities or other assets beneficially
owned by Custodian or such Sub-Custodian.
4.4.4. Agency. A Sub-Custodian engaged under this Section 4.4
shall at all times be deemed the agent of Custodian. Custodian's engagement of a
Sub-Custodian shall not relieve Custodian of any of Custodian's duties,
obligations, responsibilities or liabilities under this Agreement except as
provided in Section 8.1. Upon request of Client, Custodian shall be willing to
contract with Sub-Custodians designated by Client and reasonable acceptable to
Custodian ("Special Purpose Sub-Custodian") for purposes of (i) effecting
third-party repurchase transactions with banks, brokers, dealers, or other
entities through the use of a common custodian or sub-custodian, or (ii)
providing depository and clearing agency services with respect to certain
variable rate demand note Securities, or (iii) for other reasonable purposes
specified by Client.
4.4.5. Foreign Sub-Custodians. With respect to Foreign
Sub-Custodians, Custodian shall continuously monitor the eligibility of the
Foreign Sub-Custodian and if, at any time, Custodian determines that any Foreign
Sub-Custodian no longer satisfies the requirements of SEC Rule 17f-5(c)(2),
Custodian shall promptly provide written notice to Client and will act upon
Authorized Instructions.
4.5. Use of Nominees. Custodian, a Securities Depository and/or a
Sub-Custodian acting hereunder may register Securities in the names of their
respective nominees. Client shall have the right to approve use of a nominee
hereunder, which approval shall not be withheld unreasonably. Use of a nominee
shall require that either (i) Custodian provide Client with an affidavit from an
officer of Custodian describing the legal structure of the nominee, and
identifying the nominee's officers, directors or partners, as applicable
("Nominee Affidavit") or (ii) that the parties hereto specify any nominees'
legal structure in Schedule 4.5 to this Agreement. Custodian shall follow the
instructions of Client with respect to any required filing of a Nominee
Affidavit with the Regulatory Authorities. Client agrees to hold Custodian, any
Sub-Custodian, any Securities Depository and their respective approved nominees
harmless from any liability incurred solely by virtue of being shareholder of
record of any Securities.
4.5.1. Street Name. Client may direct Custodian to maintain or
cause a Sub-Custodian to maintain Securities in so-called "street name";
provided, however, that notwithstanding anything herein to the contrary,
Custodian and any such Sub-Custodian shall be obligated only to utilize best
efforts to timely collect income due to Client on such Securities and to notify
Client of relevant corporate actions, including, without limitation, pendency of
calls, maturities, and tender and exchange offers.
4.6. Fungibility. Securities held by Custodian hereunder, directly or
indirectly through a Securities Depository, may be treated as fungible with
other identical securities of the same issue pursuant to the provisions of the
Uniform Commercial Code of the State of New York (or other applicable laws).
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4.7. No Hypothecation. Except as provided in Section 6.8, Custodian
shall have no power to deliver, assign, pledge, lend, hypothecate or otherwise
dispose of any Security to any person or entity, except pursuant to an
Authorized Instruction.
4.8. No Release or Discharge. Except as expressly provided herein,
none of the terms or conditions contained in this Section 4 or in Sections 8 and
9 hereof shall be construed, operate or be effective to limit, release or
discharge in any manner Custodian's duties, obligations, responsibilities and
liabilities to Client in connection with Custodian's direct or indirect holding
of Securities hereunder, whether in definitive or book-entry form.
5. Cash Accounts. Client hereby authorized and instructs Custodian, as an
agent of Client, to establish and deposit accounts with State Street to be used
in connection with transactions relating to the Securities (the "Cash
Accounts"). The Cash Accounts shall be custodial accounts under this Agreement,
and shall be subject to all the terms, conditions and other provisions of this
Agreement.
5.1. Ownership and Identification. All cash held in the Cash Accounts
shall be held by Custodian for the benefit of Client and the books and records
of Custodian shall so identify the Cash Accounts.
6. Instructions by Client.
6.1. In General. Client shall give Authorized Instructions with
respect to cash and Securities only to Custodian. If Custodian, in the exercise
of the standard of care described in Section 8.1 below, is uncertain as to the
appropriate action to be taken in any circumstances, upon Custodian's request,
Client shall give Custodian Authorized Instructions as to the action to be
taken. Securities held by a Securities Depository shall be subject only to the
instructions of Custodian or the applicable Sub-Custodian.
6.2. Binding Effect. Custodian shall promptly follow and comply with,
and shall instruct all Sub-Custodians and Securities Depositories holding
Securities hereunder to promptly follow and comply with, all lawful Authorized
Instructions given by Client under and in accordance with this Agreement.
Custodian shall not be required to follow or comply with, nor shall Custodian be
required to instruct a Sub-Custodian or Securities Depository to follow or
comply with, any Authorized Instruction (i) that would violate any applicable
law, decree, regulation or order of any government, Regulatory Authority or
other governmental body or agency (including any court or tribunal), or that
otherwise would be contrary to any term, condition or provision of this
Agreement; or (ii) that could make Custodian, any Sub-Custodian or Securities
Depository, or the nominee of any of them, liable for the payment of money on
its own account, unless Client, as a prerequisite to the taking of such action,
provides Custodian and any applicable Sub-Custodians and Securities Depositories
an Indemnity in an amount and form satisfactory to it or them.
6.3. Delivery of Securities. Securities shall be transferred,
exchanged or
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delivered by Custodian, to the extent sufficient Securities are actually held in
the Securities Accounts and available for delivery, only (i) as specified by an
Authorized Instruction; (ii) in exchange for, or upon conversion into, other
Securities or cash pursuant to a plan of merger, consolidation, reorganization,
recapitalization or readjustment; (iii) upon conversion of Securities pursuant
to their terms into other Securities; or (iv) upon termination of this
Agreement.
6.4. Contractual Settlements. Subject to the provisions of Section 9,
Custodian shall settle all purchases and sales of Securities hereunder (i) in
accordance with Customer's Authorized Instructions, and (ii) on an "actual
settlement" or "good on delivery" basis.
6.5. Reporting of Certain Matters. Custodian shall promptly deliver to
Client upon receipt all written information (including, without limitation,
pendency of calls and maturities of Securities and expirations of rights in
connection therewith, calls for voting or the exercise of rights or other
specific action intended to be transmitted to holders of the Securities, proxy
statements, proxy forms, prospectuses and other corporate reports) received from
issuers of, or otherwise in respect of, the Securities held under this
Agreement. With respect to tender or exchange offers, Custodian shall promptly
deliver to Client upon receipt all written information received from issuers of
the Securities whose tender or exchange is sought and from the party (or the
party's agents) making the tender or exchange offer. If Client desires to take
action with respect to any tender offer, exchange offer or other similar
transaction, Client will so instruct Custodian (i) as to Securities held in the
United States, one (1) day prior to the date on which such action is due; and
(ii) as to Securities held outside the United States, two (2) day prior to the
day by which Custodian must provide instructions to any Sub-Custodian; provided,
however, that in the event special requirements applicable to any such
transaction require earlier delivery of instructions from Client, Custodian
shall notify Client thereof and Client shall provide instructions to Custodian
in sufficient time to provide Custodian a reasonable time to act thereon.
6.6. Securities Matters. Unless and until Custodian receives an
Authorized Instruction to the contrary, Custodian shall hold, administer and
manage the Securities in accordance with this Section 6.6.
6.6.1. Dividends and Distributions. Except as set forth in
Schedule 6.6.1 hereto, Custodian shall credit to Client's account all dividends,
interest and other payments made under, and all stock dividends, rights and
other similar distributions made, issued or received with respect to, the
Securities on the date that such payments, dividends or distributions are due,
regardless of whether such payments, dividends or distributions have been
received by Custodian on such date. If such dividends, payments or distributions
subsequently are not received, Custodian shall track the non-receipt and make
whatever reasonable claim may be necessary to enforce collection; provided,
however that if any such dividend, payment or distribution is not received
within a reasonable time, upon prior written notice to Client, Custodian may
reverse the credit made to Client's account; and provided
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further, however, that nothing herein shall obligate Custodian to initiate or
appear and participate in any legal action or bankruptcy or other insolvency
proceeding necessary to enforce any claim.
6.6.2. Presentation for Payment. Custodian shall present for
payment all coupons and other income items held by Custodian which call for
payment upon presentation, all maturing Securities and those called for
redemption, and deposit cash received upon such payments in the applicable Cash
Account; provided, however, that in the case of Securities which are called for
redemption or otherwise become payable prior to their stated maturity, Custodian
shall be considered to have acted timely hereunder if Custodian presents the
same for payment promptly upon obtaining actual knowledge thereof or when
Custodian, in the exercise of the standard of care described by Section 8.1,
should have obtained knowledge thereof.
6.6.3. Ownership Certificates. Custodian shall execute in the
name of Client such ownership and other certificates as may be required to
obtain payment or exercise rights in respect of the Securities; provided,
however, that Custodian shall not be authorized to exercise voting rights held
in respect of the Securities other than as directed in writing by Client.
6.6.4. Voting of the Securities. Custodian shall, upon receipt of
Authorized Instructions from Client, execute and deliver, or cause its
Sub-Custodians, Securities Depositories, or its or their nominees (as
applicable), to execute and deliver such proxies or other authorizations as may
be required to vote the Securities in accordance with such Authorized
Instructions. Except as permitted by such Authorized Instructions, neither
Custodian nor any of its Sub-Custodians, Securities Depositories, or its or
their nominees (as applicable) shall exercise any power to vote the Securities,
or execute any proxy, power of attorney, or other similar instrument voting any
of such Securities, or give any consent, approval, or waiver with respect
thereto, or take any other similar action.
6.6.5. Mail to Client. Custodian shall accept and open all mail
directed to Client in care of Custodian, and shall promptly forward all such
materials to Client.
6.6.6. Disclosures to Issuers. Except as otherwise required by
applicable law, Custodian shall not disclose Client's name, address and
Securities position to the issuers of the Securities when and as such issuers
request.
6.6.7. Withholding Taxes. As part of the custodial services
rendered hereunder, Custodian shall investigate and advise Client with respect
to available means and methods for the elimination at source, or for the
reclaim, of withholding taxes assessed in connection with the transactions
contemplated hereby. Custodian shall, from time to time, make such filings with
the governmental authorities as may be required to eliminate or secure the
refund of such withholding taxes upon receipt from Client, in completed form, of
all
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forms, documents, instruments, proofs and supporting information required to be
filled in connection therewith. In performing its duties under this section,
unless otherwise informed by Client, Custodian shall be entitled to apply
categorical treatment of Client according to the nationality of Client, the
particulars of its organization and other relevant details supplied by Client.
Client shall inform Custodian in writing of any change in the organization,
domicile or other relevant fact concerning tax treatment of Client and if Client
is or becomes the beneficiary of any special ruling or treatment not applicable
to the general nationality and category of entity of which Client is a part
under general laws and treaty provisions.
6.6.8. Routine Matters. Custodian will, or will instruct its
Sub-Custodians, Securities Depositories or its or their nominees, as applicable,
to attend to all routine and mechanical matters in connection with the sale,
exchange, substitution, purchase, transfer of other dealings with Securities,
except as otherwise expressly provided in this Agreement or as directed by
Client from time to time in Authorized Instructions.
6.7. Partial Offers. If Custodian, whether by nominee or otherwise,
holds Securities that are commingled and fungible with securities of the same
issue belonging to others (such that the specific Securities held for the
account of Client are not identifiable), and an offer of partial redemption,
partial payment or other action affecting less than all of such securities is
received (collectively, "Partial Offer"), Custodian shall select the securities
eligible to participate in the Partial Offer on any fair, equitable and
non-discriminatory basis that it customarily uses to make such selections. If
such fungible Securities are held by a Securities Depository or Sub-Custodian
and a Partial Offer is received, any method of selection customarily used by the
Securities Depository or Sub-Custodian, as applicable, shall be acceptable to
select the securities eligible to participate in such Partial Offer; provided
however, that Custodian shall use its best efforts to cause such selection to be
made on a fair, equitable and non-discriminatory basis.
6.8. Payments. Custodian shall make payments only to the extent that
sufficient cash is available in the applicable Cash Account or otherwise, and
only (i) as specified in an Authorized Instruction, or (ii) upon the termination
of this Agreement. Custodian or State Street may make payments, from time to
time, on behalf of Client when sufficient cash is not available in the
applicable Cash Account, but shall have no obligation to make such payments. Any
such credit, advance or overdraft shall be repaid by Client on Custodian's
demand together with the overdraft charge specified in Schedule 10 from the date
advanced until the date repaid. As security for any advance made by Custodian or
State Street to pay for Securities purchased by Client pursuant to an Authorized
Instruction, Client hereby grants Custodian and State Street a lien on and
security interest in all Securities at any time held from the account of client,
including without limitation all Securities acquired with the amount advanced.
Should Client fail to promptly repay the advance and related overdraft charges,
Custodian and State Street, as applicable, shall be entitled to utilize
available cash and to dispose of Securities pursuant to applicable law to the
extent necessary to obtain reimbursement of the amount advanced and related
overdraft charges. Custodian shall promptly notify Client of the amount of any
such overdraft and of the amount of cash and
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any Securities of any such overdraft and of the amount of cash and any
Securities debited from the Securities Accounts to repay any such advance and
related overdraft charges.
7. Reporting.
7.1. Statements~. Custodian shall mail, or cause to be mailed, or
transmit electronically to Client, or with Client's permission, make available
to Client electronically, on not less than a monthly basis, statements of the
Securities Accounts and Cash Accounts. The statements shall list the Securities
and the cash balances of the accounts. Custodian shall promptly correct any
errors or omissions in such statements of which it becomes aware and shall
furnish Client with prompt notice of the correction.
7.2. New Jersey Report. Custodian shall periodically file a report
with respect to the Securities held by it under this Agreement as required, and
in the form prescribed, by Section 11:19-2.4 of the New Jersey Administrative
Code.
7.3. Access to Records. Upon demand, Custodian shall allow Client,
Client's advisors, accountants, counsel and other authorized representatives,
and the Regulatory Authorities such access to the records of Custodian relating
to the Securities Accounts, the Cash Accounts and the transactions contemplated
hereby as may be required under the circumstances. Custodian shall cooperate
with all such requests and records inspections on a best efforts basis but shall
be reimbursed by Client for all reasonable expenses and employee time invested
in any such inspection outside of normal and routine periodic reviews.
7.4. Accounting Control System Reports. Custodian shall provide Client
with any report concerning the internal accounting control systems of a
Securities Depository holding Securities hereunder to which Custodian has access
and with annual reports on Custodian's own systems of internal accounting
control.
7.5. Other information. Custodian shall maintain records sufficient to
verify the related information reported in Client's annual and quarterly
statutory financial statements as filed with the State of New Jersey and the
National Association of Insurance Commissioners. Custodian further agrees (i) to
provide, on request, affidavits in the forms shown at Schedule 7.5 hereto as
required by Circular Letter 1977-2 of The New York State Insurance Department
(Attachments B, C and D thereto) or in such other substantially equivalent forms
as may be reasonably acceptable to Client and the New York State Insurance
Department in order for such securities to be recognized as admitted assets for
statutory reporting purposes; (ii) to provide similar affidavits required by the
Regulatory Authorities of other jurisdictions; and (iii) to provide such
additional reporting information to Client regarding the Securities and the
transactions contemplated hereby as may be requested from time to time by
Client.
8. Custodian Responsibilities and Indemnification.
11
8.1. Standard of Care. Custodian shall exercise the standard of care
that a professional custodian engaged in the banking or trust company industry
and having professional expertise in financial and securities processing
transactions and custody functions would observe with respect to the subject
matter of this Agreement. Custodian shall be liable to Client for losses of
Securities or other property in the Securities Accounts and the Cash Accounts
which result from (i) breach of this Agreement, or (ii) the negligence or
willful misconduct of Custodian and any Securities Depository or Sub-Custodian
acting hereunder or any of their respective officers, employees, agents or
nominees except that Custodian shall be responsible to Client for any loss,
damage or expense suffered or incurred by Client resulting from the actions or
omissions of any Securities Depository or Special Purpose Sub-Custodian only to
the same extent such entity is responsible to Custodian. Client shall be
entitled to review and participate in the negotiation of contracts with
Sub-Custodians. Custodian shall pursue, or cause its Sub-Custodian to pursue,
available rights and remedies against any Securities Depository or Special
Purpose Sub-Custodian responsible for any loss, damage or expense suffered or
incurred by Client with all reasonable business efforts. Client shall be
subrogated to such rights and remedies, to the extent allowable under applicable
law, at Client's option. Notwithstanding the foregoing, Custodian shall be
strictly liable for any loss of Securities resulting from fire, robbery,
burglary, theft or other disappearance.
8.2. Replacements. In the event of loss of, or damage to, a Security
held hereunder, for which Custodian is responsible under the terms hereof,
Custodian, on demand by Client, will promptly replace such lost or damaged
Security with securities identical in kind and quality, together with all rights
and privileges pertaining thereto. If Custodian is unable to replace the
Security, Custodian shall pay Client a cash amount equal to the fair market
value of the Security as of the date of the discovery of the loss or damage.
8.3. Insurance. Custodian represents, warrants and covenants that it
has in force at the date hereof, and shall maintain in force during the full
term of this Agreement, insurance with respect to the Securities covering such
risks and in such amounts as Custodian maintains with respect to securities held
for its own account and for the account of other customers.
8.4. Indemnification of Client. Custodian shall indemnify, defend and
hold Client harmless of, from and against any loss, damage, claim, demand or
liability, including, without limitation, reasonable costs and attorneys' fees
(collectively, "Losses"), incurred by Client to the extent resulting from (1)
Custodian's breach of this Agreement, (ii) Custodian's negligence or (iii)
Custodian's willful misconduct. Custodian's obligation to indemnify Client
hereunder is conditioned upon Custodian's receipt from Client of (a) prompt
written notice of the claim or matter in respect of which indemnity is sought;
provided, however, that failure or delay in giving such notice shall not relieve
Custodian of its obligations hereunder except to the extent Custodian is
prejudiced thereby; (b) cooperation of Client, on a best efforts basis, in the
defense and settlement of any matter involving a third party claim; and (c)
Client's tender to Custodian of the right to control, defend and settle, in
Custodian's
12
sole discretion, any matter involving a third party claim. Under no
circumstances shall Custodian be liable to Client for indirect, special or
consequential damages, irrespective of whether or not Custodian was apprised of
the likelihood of such damages.
8.5. Reliance by Custodian. Notwithstanding anything in this Agreement
to the contrary, but provided that Custodian has otherwise exercised the
standard of care described in Section 8.1:
(a) Custodian may conclusively assume that any procedure agreed upon, approved
or directed by Client, its accountants or other advisors does not conflict with
or violate any requirements of its articles of incorporation, bylaws, any
prospectus, any applicable law, rule or regulation of the type described in
Section 8.6(b), or any order, decree or agreement by which Client may be bound;
(b) Custodian shall rely upon Client to notify Custodian of any statutes,
rules, regulations, requirements or policies which relate to Client, and of any
changes therein, which may materially impact Custodian's performance of its
responsibilities hereunder or its related operational policies and procedures in
a manner different from United States domiciled insurance companies in general;
(c) Custodian may conclusively rely upon the advice, opinion and statements of
the Authorized Persons, and Client's accountants, auditors and counsel;
(d) Custodian may conclusively rely upon any advice, notice, request, consent,
certificate or other document or instrument reasonable believed by it to be
genuine and to be signed by the proper party or parties; and
(e) Custodian shall not be responsible or liable for the failure or delay in
performance of its obligations hereunder, or any entity for which it is
responsible hereunder, arising out of or caused, directly or indirectly, by
circumstances beyond the affected entity's reasonable control, including,
without limitation, governmental or exchange action, statute, ordinance, ruling,
regulation or direction; war, strike, riot, emergency, civil disturbances,
terrorism, vandalism, explosions, labor disputes, freezes, floods, tornados,
telecommunications system failures, revolutions or insurrections. Custodian
agrees to implement and maintain reasonable back-up and disaster recovery
procedures and plans designed to minimize any loss of data or service
interruption by all reasonable practicable steps.
9. Limitations to Custodian Duties.
9.1. Payment and Delivery Instructions. Client stipulates and
acknowledges that in some securities markets, securities deliveries and payments
may not be, or are not customarily, made simultaneously. Accordingly, Client
agrees that, notwithstanding the giving of Authorized Instructions to deliver
Securities against payment or to pay for
13
Securities against delivery, Custodian may make or accept payment for, or may
deliver, Securities in such form, at such time and in such manner as shall be in
accordance with the customs prevailing in the relevant market or among
professional custodians engaged in the banking or trust company industry and
having professional expertise in financial and securities processing
transactions and custody services.
9.2. Reversals. Client stipulates and acknowledges that in some
securities markets, and under certain cash clearing systems, deliveries of
securities and cash may be reversed under certain circumstances. Accordingly,
Client agrees that credits of Securities to the Securities Accounts and cash to
the Cash Accounts will be provisional and subject to reversal if, in accordance
with local practice in the market, the delivery of the Security or cash giving
rise to the credit is reversed.
10. Fees. As compensation for the services rendered hereunder, Client shall
pay Custodian a fee calculated in accordance with Schedule 10 hereto.
11. No Liens. Except as provided in Section 6.8, no charge or lien against
any Cash Account or Securities Account shall be permitted for any reason,
including, but not limited to, due and unpaid Custodian fees under Section 10 or
any other expense or loss incurred by Custodian in performing hereunder, unless
Client has first approved such charge or lien by Authorized Instruction.
12. Idemnification of Custodian. Client shall indemnify, defend and hold
Custodian harmless of, from and against any Losses incurred by Custodian to the
extent resulting from (i) Client's breach of this Agreement, (ii) the invalidity
of any communication that Custodian believes in good faith and in accordance
with the standard of care required by Section 8.1 hereof to have been an
Authorized Instruction or a properly executed and genuine document, (iii) any
action taken or omitted to be taken, in accordance with standard of care
required by Section 8.1 hereof, by Custodian in reliance on an Authorized
Instruction or other document or information provided to it by Client, (iv)
Client's negligence, or (v) Client's willful misconduct. Client's obligation to
indemnify Custodian hereunder is conditioned upon Client's receipt from
Custodian of (a) prompt written notice of the claim or matter in respect of
which indemnity is sought; provided, however that failure or delay in giving
such notice shall not relieve Client of its obligations hereunder except to the
extent Client is prejudiced thereby; (b) cooperation of Custodian, on a best
efforts basis, in the
14
defense and settlement of any matter involving a third-party claim; (c)
Custodian's tender to Client of the right to control, defend and settle, in
Client's sole discretion, any matter involving a third-party claim. Under no
circumstances shall Client be liable to Custodian for indirect, special or
consequential damages, irrespective of whether or not Client was apprised of the
likelihood of such damages.
13. Termination. This Agreement may be terminated by either party upon the
giving of not less than sixty (60) days prior written notice. This Agreement may
be terminated immediately for cause. Terminations "for cause" shall be limited
to (i) material breach, (ii) fraud, (iii) gross negligence, (iv) insolvency, and
(v) the commencement of bankruptcy proceedings against a party. Upon termination
of this Agreement, Client shall, by Authorized Instruction, notify Custodian of
the name of the person or entity to whom all Securities and cash shall be
delivered or paid. Custodian shall promptly deliver all Securities and cash,
along with all records not otherwise in the possession of Client pertaining
thereto (including, but not limited to, those records pertaining to Securities
held in book-entry form, by Federal Reserve banks or retained by the issuer) to
the person or entity so specified. Regardless of whether the termination is
initiated by Client or Custodian, Custodian's responsibilities under this
Agreement shall continue until a successor custodian's appointment becomes
effective and all Securities and cash have been transferred.
14. Notices. Except as otherwise specified herein, any notice or other
communication to Custodian is to be addressed to it at 000 Xxxx Xxxxx Xxxxxx,
Xxxxxx Xxxx, Xxxxxxxx 00000 Attention: Custody Department or to such other
address as may be specified by Custodian from time to time. Any notice or other
communication to Client shall be addressed to it at 0 Xxxxxxx Xxxxxx, Xxxxxx,
Xxx Xxxxxx 00000, Attention: Xxxxx Xxxxx or to such other address as may be
specified by Client from time to time. Notices given hereunder shall be
effective upon receipt.
15. Amendments and Waivers. An amendment or waiver of any term of this
Agreement shall be effective only if in writing and signed by the party to be
bound. The waiver by either party of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach.
16. Successors and Assigns. This Agreement shall bind the successors and
permitted assigns of the parties. Neither party may assign any of its rights or
obligations under this Agreement without the prior written consent of the other.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to its
conflicts of law rules.
18. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall constitute an original, and all of which taken
together shall comprise one and the same instrument.
15
19. Headings. The section headings used herein are for reference only and
shall not affect the interpretation of any provision of this Agreement.
20. Integration. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes any and all
prior agreements and understandings, oral or written, relating thereto.
21. Confidentiality. The parties shall not disclose to any other party, but
shall keep confidential, the terms and conditions of this Agreement and any
amendment hereof, except to the extent required by an or regulatory authorities.
22. Security Procedures. Client acknowledges that it has been fully
informed of the risks associated with the various methods of communication for
transmitting Authorized Instructions to Custodian. Custodian has recommended
that Client transmit Authorized Instructions to Custodian using one or more
specified methods of communication and has recommended a type of Security
Procedure for each such method. Client hereby agrees that the Security
Procedures selected by it shall be deemed commercially reasonable even if such
Security Procedures offer less protection than those recommended by Custodian.
If Client elects to transmit Authorized Instructions to Custodian by a method of
communication for which no Security Procedure has been agreed, Client agrees to
be bound by any such Authorized Instruction that Custodian believes in good
faith to have been given by an Authorized Person. Client shall (i) not disclose,
or permit any Authorized Person to disclose, except on a "need to know" basis,
any aspects of any Security Procedure, (ii) notify Custodian immediately if the
confidentiality of any Security Procedure is compromised and (iii) act to
prevent the Security Procedures from being further compromised. Client and
Custodian have entered into a separate agreement concerning Authorized
Instructions which constitute "payment orders" under Article 4A of the Uniform
Commercial Code (the "Article 4A Agreement"). With respect to such Authorized
Instructions, this Agreement and the Article 4A Agreement shall be construed
cumulatively, but in the event of any conflict or inconsistency between them,
the terms of the Article 4A Agreement shall control. With respect to Authorized
Instructions communicated orally to Custodian, (i) Custodian shall be entitled
to rely thereon if Custodian reasonable believes they are communicated by an
Authorized Person, (ii) Custodian may in its discretion tape record the
communication, (iii) Client shall confirm the same through a written or
electronic Authorized Instruction by no later than the next business day, and
(iv) Custodian shall not be responsible hereunder for actions taken or omitted
reasonably and in good faith based on any oral communication prior to receipt of
and a reasonable time to act on the written or electronic confirming Authorized
Instruction.
23. Severability. In the event any of the terms or provisions of this
Agreement shall be held to be unenforceable, the remaining terms and provisions
shall be unimpaired
16
and the unenforceable term or provision shall be replaced by such enforceable
term or provision as comes closest to the intention underlying the unenforceable
term or provision.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.
INVESTORS FIDUCIARY TRUST THE PRUDENTIAL INSURANCE
COMPANY COMPANY OF AMERICA
By: Xxxxx X. Strain By: Xxxxx X. Xxxxx
Title: FVP Title: Vice President and
Assistant Treasurer
17
SCHEDULE 1.6
Securities Depositories
Country Central Depository
United States Depository Trust Company
Participants Trust Company
Federal Reserve Bank
SCHEDULE 3.1
Securities Accounts
Variable Contract Account -2 ("VCA-2") - YF1A
Variable Contract Account -10 ("VCA-lO") - YF1E
Variable Contract Account -11 (`VCA-ll") - YC1A
SCHEDULE 4.4.1
Sub-Custodians
Country Subcustodian
United States State Street Bank and Trust
Chase Manhattan Bank (F/K/A Chemical Bank)
(Physical)
LIST OF NOMINEES
Except where otherwise noted, each Nominee is a domestic corporation wholly
owned by the local Subcustodian.
Australia Westpac Custodian Nominees Ltd.
Austria None
Belgium None
Denmark None
Finland None
France None
Germany None
Hong Kong Xxxxxxxx Nominees Ltd. (physical)/HKSCC Nominees Ltd.,
for CCASS (depository)(1)
Ireland Bank of Ireland Nominees Ltd.
Italy None
Japan None
Malaysia Cartaban (M) Nominees Sdn Berhad.
Netherlands None
New Zealand ANZ Nominees Ltd.
Norway None
Singapore DBS Nominees Pty Ltd.
Spain None
Sweden Skandinaviska Enskilda Banken, as nominee(2)
Switzerland None
United Kingdom State Street London Nominees Ltd.
United States CEDE & Co.(Depository Trust Co. securities), a New York
limited purpose trust company
MBSCC & Co. (Participants Trust Co. securities), a New
York limited purpose trust company
IFTCO (domestic certificated securities), a Missouri
general partnership composed of officers of the Custodian
Note: In countries where "None" is listed, securities are held through a central
securities depository that does not employ nominees. In such countries,
securities are registered in the name of the beneficial owner (Switzerland only)
or securities are held in bearer form.
(1) H.K. Corporation is owned by the central depository in Hong Kong.
(2) Subcustodian bank (Swedish Banking Corporation) with designation as
nominee
Foreign Income Availability Schedule 6.6.1
State Street Bank Sub-custodian
Income will be credited contractually on pay day in the markets noted with
Contractual Income Policy. The markets noted with Actual income policy will be
credited income when it is received.
Market Income Policy Market Income Policy Market Income Policy
=========================================================================================================================
Argentina Actual India Actual South Africa Actual
Australia Contractual Indonesia Actual South Korea Actual
Austria Contractual Ireland Actual Spain Contractual
Bangladesh Actual Israel Actual Sri Lanka Actual
Belgium Contractual Italy Contractual Swaziland Actual
* Bolivia Actual Ivory Coast Actual Sweden Contractual
Botswana Actual Japan Contractual Switzerland Contractual
Brazil Actual * Jamaica Actual Taiwan Actual
Canada Contractual Jordan Actual Thailand Actual
Chile Actual Kenya Actual * Trinidad & Actual
Tobago
China Actual Malaysia Actual * Tunisia Actual
Colombia Actual Mauritius Actual Turkey Actual
Cyprus Actual Mexico Actual United Kingdom Contractual
Czech Republic Actual Morocco Actual United States See Attached
Denmark Contractual Namibia Actual Uruguay Actual
Ecuador Actual Netherlands Contractual Venezuela Actual
Egypt Actual New Zealand Contractual Zambia Actual
**Euroclear Contractual/Actual Norway Contractual Zimbabwe Actual
Euro CDs Actual Pakistan Actual
Finland Contractual Peru Actual
France Contractual Philippines Actual
Germany Contractual Poland Actual
Ghana Actual Portugal Contractual
Greece Actual * Russia Actual
Hong Kong Contractual Singapore Contractual
Hungary Actual Slovak Republic Actual
* Market is not 17F-5 eligible
** For Euroclear, contractual income paid only in markets listed with Income
Policy of Contractual.
United States Income Availability Schedule 6.6.1
Income Type DTC FED PTC Physical
================================================================================
Dividends Contractual N/A N/A Actual
Fixed Rate Interest Contractual Contractual N/A Actual
Variable Rate Interest Contractual Contractual N/A Actual
GNMA I N/A N/A Contractual PD +1 N/A
GNMA II N/A N/A Contractual PD *** N/A
Mortgages Actual Contractual Contractual Actual
Maturities Actual Contractual N/A Actual
Exceptions to the above Contractual Income Policy include securities that are:
* Involved in a trade whose settlement either failed, or is pending over the
record date, (excluding the United States);
* On loan under a self directed securities lending program other than IFTC`s
own vendor lending program;
* Known to be in a condition of default, or suspected to present a risk of
default or payment delay;
* In the asset categories, without limitation, of Private Placements,
Derivatives, Options, Futures, CMOs, and Zero Coupon Bonds.
* Securities whose amount of income and redemption cannot be calculated in
advance of payable date, or determined in advance of actual collection,
examples include ADRs;
* Payments received as the result of a corporate action, not limited to, bond
calls, mandatory or optional puts, and tender offers.
*** For GNMA II securities, if the 19th day of the month is a business day,
Payable/Distribution Date is the next business day. If the 19th is not a
business day, but the 20th is a business day. Payable/Distribution date is the
first business day after the 20th. If both the 19th and 20th are not business
days, Payable/Distribution will be the next business day thereafter.
SSBJune 25, 1996
SCHEDULE 7.5
Affidavit Forms
ATTACHMENT B
CUSTODIAN AFFIDAVIT
(For use by a custodian bank where securities entrusted to its care and have not
been re-deposited elsewhere.)
STATE OF
S.S.:
COUNTY OF
__________________, being duly sworn deposes and says that he is of ___________,
a banking corporation organized under and pursuant to the laws of the
_____________ with the principal place of business at ______________
(hereinafter called the "bank");
That his duties involve supervision of activities of the bank as custodian
and records relating thereto;
That the bank is custodian for certain securities of_____________ having a
place of business at ________ (hereinafter called the "insurance company")
pursuant to an agreement between the bank and the insurance company;
That the schedule attached hereto is a true and complete statement of
securities (other than those caused to be deposited with The Depository Trust
Company or the Federal Reserve Bank of New York under the Federal Reserve book
entry procedure) which were in the custody of the bank for the account of the
insurance company as of the close of business on ___________; that, unless
otherwise indicated on the schedule, the next maturing and all subsequent
coupons were then either attached to coupon bonds or in the process of
collection; and that, unless otherwise shown on the schedule, all such
Securities were in bearer form or in registered form in the name of the
insurance company or its nominee or a nominee of the bank, or were in the
process of being registered in such form;
That the bank as custodian has the responsibility for the safekeeping of
such securities as that responsibility is specifically set forth in the
agreement between the bank as custodian and the insurance company; and
That, to the best of his knowledge and belief, unless otherwise shown on
the schedule, said securities were the property of said insurance company and
were free of all liens, claims or encumbrances whatsoever.
Subscribed and sworn to
before me this _______ day
of___________,_____,__________________(L.S.)
SCHEDULE 7.5
Affidavit Forms
ATTACHMENT C
CUSTODIAN AFFIDAVIT
(For use in instances where a custodian bank maintains securities on deposit
with the Depository Trust Company.)
STATE OF
S.S.:
COUNTY OF
_________________, being duly sworn deposes and says that he is __________ of
the ___________, a banking corporation organized under and pursuant to the laws
of the _____________ with its principal place of business at _____________
(hereinafter called the "bank");
That his duties involve supervision of activities of the bank as custodian
and records relating thereto;
That the bank is custodian for certain securities of_________, with a place
of business at _________ (hereinafter called the "insurance company") pursuant
to an agreement between the bank and the insurance company;
That the bank has caused certain of such securities to be deposited with
The Depository Trust Company, 00 Xxxxx Xxxxxx, Xxx Xxxx (hereinafter called
"DTC"); and that the schedule attached hereto is a true and complete statement
of the securities of the insurance company of which the bank was custodian as of
the close of business on _____________ and which were so deposited with DTC at
such date;
That the bank as custodian has the responsibility for the safekeeping of
such securities whether in the possession of the bank or deposited with DTC as
that responsibility is specifically set forth in the agreement between the bank
as custodian and the insurance company; and
That, to the best of his knowledge and belief, unless otherwise shown on
the schedule, said securities were the property of said insurance company and
were free of all liens, claims or encumbrances whatsoever.
Subscribed and sworn to
before me this _______ day
of___________,_____,__________________(L.S.)
SCHEDULE 7.5
Affidavit Forms
ATTACHMENT D
CUSTODIAN AFFIDAVIT
(For use where ownership is evidenced by book entry at Federal Reserve Bank of
New York.)
STATE OF
S.S.:
COUNTY OF
__________________, being duly sworn deposes and says that he is ___________ of
the ___________, a banking corporation organized under and pursuant to the laws
of the ______________ with the principal place of business at _____________
(hereinafter called the "bank");
That his duties involve the supervision of activities of the bank as
custodian and records relating thereto;
That the bank is custodian for certain securities of, with a place of
business at _________ (hereinafter called the "insurance company") pursuant to
an agreement between the bank and the insurance company;
That it has caused certain of such securities to be credited to its
book-entry account with the Federal Reserve Bank of New York under the Federal
Reserve book entry procedure; and that the schedule attached hereto is a true
and complete statement of the securities of the insurance company of which the
bank was custodian as of the close of business on _____________ which were in a
"General" book-entry account maintained in the name of the bank on the books and
records of the Federal Reserve Bank of New York at such date;
That the bank has the same responsibility for the safekeeping of such
securities whether in the possession of the bank or in said "General" book-entry
account as that responsibility is specifically set forth in the agreement
between the bank as custodian and the insurance company; and
That, to the best of his knowledge and belief, unless otherwise shown on
the schedule, said securities were the property of said insurance company and
were free of all liens, claims or encumbrances whatsoever.
Subscribed and sworn to
before me this ______ day
of___________,_____,__________________(L.S.)
