EXHIBIT J
JPMORGAN LOGO
-------------------------------------------------------
GLOBAL CUSTODY AGREEMENT
BETWEEN
FORTRESS INVESTMENT TRUST II
AND
JPMORGAN CHASE BANK
September 27, 2002
GLOBAL CUSTODY AGREEMENT
TABLE OF CONTENTS
1. Intention of the Parties; DEFINITIONS-----------------------------------------------1
1.1 Intention of the Parties----------------------------------------------------------1
1.2 Definitions-----------------------------------------------------------------------1
2. WHAT BANK IS REQUIRED TO DO----------------------------------------------------------3
2.1 Set Up Accounts-------------------------------------------------------------------3
2.2 Cash Account----------------------------------------------------------------------3
2.3 Segregation of Assets; Nominee Name-----------------------------------------------4
2.4 Settlement of Trades--------------------------------------------------------------4
2.5 Contractual Settlement Date Accounting--------------------------------------------5
2.6 Actual Settlement Date Accounting-------------------------------------------------5
2.7 Income Collection (Autocredit(R))-------------------------------------------------6
2.8 Certain Ministerial Acts----------------------------------------------------------6
2.9 Corporate Actions-----------------------------------------------------------------6
2.10 Proxies-------------------------------------------------------------------------7
2.11 Statements----------------------------------------------------------------------8
2.12 Access to Bank's Records--------------------------------------------------------9
2.13 Maintenance of Financial Assets at Subcustodian Locations-----------------------9
2.14 Tax Reclaims-------------------------------------------------------------------10
2.15 Foreign Exchange Transactions--------------------------------------------------10
3. Instructions------------------------------------------------------------------------10
3.1 Acting on Instructions; Unclear Instructions-------------------------------------10
3.2 Confirmation of Oral Instructions/Security Devices-------------------------------10
3.3 Instructions; Contrary to Law/Market Practice------------------------------------11
3.4 Cut-off Times------------------------------------------------------------------11
4. Fees Expenses and Other Amounts Owing to Bank---------------------------------------11
4.1 Fees and Expenses----------------------------------------------------------------11
4.2 Overdrafts-----------------------------------------------------------------------11
4.3 Bank's Right Over Securities; Set-off-------------------------------------------12
5. Subcustodians, Securities Depositories AND OTHER AGENTS-----------------------------12
5.1 Appointment of Subcustodians-----------------------------------------------------12
5.2 Liability for Subcustodians------------------------------------------------------13
5.3 Use of Agents--------------------------------------------------------------------14
6. ADDITIONAL PROVISIONS RELATING TO Customer------------------------------------------14
6.1 Representations of Customer and Bank---------------------------------------------14
6.2 Customer to Provide Certain Information to Bank----------------------------------15
6.3 Customer is Liable to Bank Even if it is Acting for Another Person---------------15
7. When Bank is liable to Customer-----------------------------------------------------15
7.1 Standard of Care; Liability------------------------------------------------------15
7.2 Force Majeure--------------------------------------------------------------------16
7.3 Bank Can Consult With Counsel----------------------------------------------------16
7.4 Bank Provides Diverse Financial Services and May Generate Profits as a Result----16
8. TAXATION----------------------------------------------------------------------------17
8.1 Tax Obligations------------------------------------------------------------------17
8.2 Tax Reclaims---------------------------------------------------------------------17
9. Termination-------------------------------------------------------------------------18
10. MISCELLANEOUS-----------------------------------------------------------------------18
10.1 Notices------------------------------------------------------------------------18
10.2 Successors and Assigns---------------------------------------------------------18
10.3 Interpretation-----------------------------------------------------------------19
10.4 Entire Agreement---------------------------------------------------------------19
10.5 Information Concerning Deposits at Bank's London Branch------------------------19
10.6 Insurance----------------------------------------------------------------------19
10.7 Governing Law and Jurisdiction-------------------------------------------------19
10.8 Severability; Waiver; and Survival---------------------------------------------20
10.9 Counterparts-------------------------------------------------------------------20
10.10 No Third Party Beneficiaries---------------------------------------------------21
GLOBAL CUSTODY AGREEMENT
This Agreement, dated September 27, 2002, is between JPMORGAN
CHASE BANK ("Bank"), with a place of business at 000 Xxxx Xxxxxx, Xxx Xxxx,
XX 00000; and FORTRESS INVESTMENT TRUST II ("Customer") with a place of
business at 0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000.
1. INTENTION OF THE PARTIES; DEFINITIONS
1.1 Intention of the Parties.
(a) This Agreement sets out the terms governing custodial,
settlement and certain other associated services offered by Bank to
Customer. Bank will be responsible for the performance of only those
Securities custody duties that are set forth in this Agreement. Customer
acknowledges that Bank is not providing any legal, tax or investment advice
in connection with the services hereunder.
(b) Investing in foreign markets may be a risky enterprise. The
holding of Financial Assets and cash in foreign jurisdictions may involve
risks of loss or other special considerations. Bank will not be liable for
any loss that results from the general risks of investing or Country Risk.
1.2 Definitions.
(a) As used herein, the following terms have the meaning
hereinafter stated.
"Account" has the meaning set forth in Section 2.1 of this
Agreement.
"Affiliate" means an entity controlling, controlled by, or under
common control with, Bank.
"Affiliated Subcustodian" means a Subcustodian that is an
Affiliate.
"Applicable Law" means any statute, whether national, state or
local, applicable in the United States or any other country (including,
without limitation, the U.S. Investment Company Act of 1940 (the "1940
Act"), as amended and the rules and regulations promulgated thereunder),
the rules of the treaty establishing the European Community, any other law,
rule, regulation or interpretation of any governmental entity, any
applicable common law, and any decree, injunction, judgment, order, ruling,
or writ of any governmental entity.
"Authorized Person" means any person who has been designated by
written notice from Customer (or by any agent designated by Customer,
including, without limitation, an investment manager) to act on behalf of
Customer hereunder. Such persons will continue to be Authorized Persons
until such time as Bank receives Instructions from Customer (or its agent)
that any such person is no longer an Authorized Person.
2
"Bank Indemnitees" means Bank, its Subcustodians, and their
respective nominees, directors, officers, employees and agents.
"Bank's London Branch" means the London branch office of JPMorgan
Chase Bank.
"Cash Account" has the meaning set forth in Section 2.1(a)(ii).
"Corporate Action" means any subscription right, bonus issue,
stock repurchase plan, redemption, exchange, tender offer, or similar
matter with respect to a Financial Asset in the Securities Account that
require discretionary action by the holder, but does not include proxy
solicitations.
"Country Risk" means the risk of investing or holding assets in a
particular country or market, including, but not limited to, risks arising
from nationalization, expropriation or other governmental actions; the
country's financial infrastructure, including prevailing custody and
settlement practices; laws applicable to the safekeeping and recovery of
Financial Assets and cash held in custody; the regulation of the banking
and securities industries, including changes in market rules; currency
restrictions, devaluations or fluctuations; and market conditions affecting
the orderly execution of securities transactions or the value of assets.
"Entitlement Holder" means the person named on the records of a
Securities Intermediary as the person having a Securities Entitlement
against the Securities Intermediary.
"Financial Asset" means a Security and refers, as the context
requires, either to the asset itself or to the means by which a person's
claim to it is evidenced, including a Security, a security certificate, or
a Securities Entitlement. "Financial Asset" does not include cash.
"Instructions" means instructions which: (i) contain all necessary
information required by Bank to enable Bank to carry out the Instructions;
(ii) are received by Bank in writing or via Bank's electronic instruction
system, SWIFT, telephone, tested telex, facsimile or such other methods as
are for the time being agreed by Customer (or an Authorized Person) and
Bank; and (iii) Bank believes in good faith have been given by an
Authorized Person or are transmitted with proper testing or authentication
pursuant to terms and conditions which Bank may specify.
"Liabilities" means any liabilities, losses, claims, costs,
damages, penalties, fines, obligations, or expenses of any kind whatsoever
(including, without limitation, reasonable attorneys', accountants',
consultants' or experts' fees and disbursements).
"Securities" means stocks, bonds, rights, warrants and other
negotiable and non-negotiable instruments, whether issued in certificated
or uncertificated form, that are commonly traded or dealt in on securities
exchanges or financial markets. "Securities" also means other obligations
of an issuer, or shares, participations and interests in an issuer
recognized in the country in which it is issued or dealt in as a medium for
investment and any other property as may be acceptable to Bank for the
Securities Account.
3
"Securities Account" means each Securities custody account on
Bank's records to which Financial Assets are or may be credited pursuant
hereto.
"Securities Depository" has the meaning set forth in Section 5.1
of this Agreement.
"Securities Entitlement" means the rights and property interests
of an Entitlement Holder with respect to a Financial Asset as set forth in
Part 5 of Article 8 of the Uniform Commercial Code of the State of New
York, as the same may be amended from time to time.
"Securities Intermediary" means Bank, a Subcustodian, a Securities
Depository, and any other financial institution which in the ordinary
course of business maintains Securities custody accounts for others and
acts in that capacity.
"Subcustodian" has the meaning set forth in Section 5.1 and
includes Affiliated Subcustodians.
(b) All terms in the singular will have the same meaning in the
plural unless the context otherwise provides and visa versa.
2. WHAT BANK IS REQUIRED TO DO
2.1 Set Up Accounts.
(a) Bank will establish and maintain the following accounts
("Accounts"):
(i) a Securities Account in the name of Customer for
Financial Assets, which may be received by or on behalf
of Bank or its Subcustodian for the account of Customer,
including as an Entitlement Holder; and
(ii) an account in the name of Customer ("Cash Account") for
any and all cash in any currency received by or on behalf
of Bank for the account of Customer.
Notwithstanding paragraph (ii), cash held in respect of those markets where
Customer is required to have a cash account in its own name held directly
with the relevant Subcustodian or a Securities Depository will be held in
that manner and will not be part of the Cash Account.
(b) At the request of Customer, additional Accounts may be opened
in the future, which will be subject to the terms of this Agreement.
2.2 Cash Account.
Except as otherwise provided in Instructions acceptable to Bank,
all cash held in the Cash Account will be deposited during the period it is
credited to the Accounts in one or more deposit accounts at Bank or at
Bank's London Branch. Any cash so deposited with Bank's London Branch will
be payable exclusively by Bank's London Branch in the applicable currency,
subject
4
to compliance with Applicable Law, including, without limitation, any
restrictions on transactions in the applicable currency imposed by the
country of the applicable currency.
2.3 Segregation of Assets; Nominee Name.
(a) Bank will identify in its records that Financial Assets
credited to Customer's Securities Account belong to Customer (except as
otherwise may be agreed by Bank and Customer).
(b) To the extent permitted by Applicable Law or other market
practice, Bank will require each Subcustodian to identify in its own
records that Financial Assets held at such Subcustodian by Bank on behalf
of its customers belong to customers of Bank, such that it is readily
apparent that the Financial Assets do not belong to Bank or the
Subcustodian.
(c) Bank is authorized, in its discretion:
(i) to hold in bearer form, such Financial Assets as are
customarily held in bearer form or are delivered to Bank
or its Subcustodian in bearer form;
(ii) to hold Securities in or deposit Securities with any
Securities Depository, settlement system or
dematerialized book entry or similar systems in
compliance with applicable Federal Reserve Board and
Securities and Exchange Commission (the "SEC") rules and
regulations; and
(iii) to register in the name of Customer, Bank, a
Subcustodian, a Securities Depository, or their
respective nominees, such Financial Assets as are
customarily held in registered form..
(d) All Financial Assets of Customer held in physical form will be
physically segregated in a Securities Account solely for the benefit of
Customer.
(e) Bank is authorized, when directed to do so by Customer, to
hold Financial Assets at third parties and to register Financial Assets in
broker "street name" or in the name of other third parties (or their
nominees). Notwithstanding Section 7.1, Bank shall have no liability for
any loss of Financial Assets or other damages resulting from holding or
registering Financial Assets as so directed by Customer.
Customer authorizes Bank or its Subcustodian to hold Financial Assets in
omnibus accounts and will accept delivery of Financial Assets of the same
class and denomination as those with Bank or its Subcustodian.
2.4 Settlement of Trades.
When Bank receives an Instruction directing settlement of a
transaction in Financial Assets that includes all information required by
Bank, Bank will use reasonable care to effect such settlement as
instructed. Settlement of transactions in Financial Assets will be
conducted in accordance with prevailing standards of the market in which
the transaction occurs; provided
5
that, wherever practicable, transactions will be settled on a "delivery
versus payment" basis. Without limiting the generality of the foregoing,
the risk of loss will be Customer's whenever Bank delivers Financial Assets
or payment in accordance with applicable market practice in advance of
receipt or settlement of the expected consideration. In the case of the
failure of Customer's counterparty (or other appropriate party) to deliver
the expected consideration as agreed, Bank will contact the counterparty to
seek settlement, but Bank will not be obligated to institute legal
proceedings, file a proof of claim in any insolvency proceeding, or take
any similar action.
2.5 Contractual Settlement Date Accounting.
(a) Bank will effect book entries on a "contractual settlement
date accounting" basis as described below with respect to the settlement of
trades in those markets where Bank generally offers contractual settlement
date accounting and will notify Customer of those markets from time to
time.
(i) Sales: On the settlement date for a sale, Bank will
credit the Cash Account with the proceeds of the sale and
transfer the relevant Financial Assets to an account at
Bank pending settlement of the trade where not already
delivered.
(ii) Purchases: On the settlement date for the purchase (or
earlier, if market practice requires delivery of the
purchase price before the settlement date), Bank will
debit the Cash Account for the settlement amount and
credit a separate account at Bank. Bank then will post
the Securities Account as awaiting receipt of the
expected Financial Assets. Customer will not be entitled
to the Financial Assets that are awaiting receipt until
Bank or a Subcustodian actually receives them.
Bank reserves the right to restrict in good faith the availability of
contractual settlement date accounting for credit or operational reasons.
(b) Bank may (in its absolute discretion) upon oral or written
notification to Customer reverse any debit or credit made pursuant to
Section 2.5(a) prior to a transaction's actual settlement, and Customer
will be responsible for any costs or liabilities resulting from such
reversal. Customer acknowledges that the procedures described in this
sub-section are of an administrative nature, and Bank does not undertake to
make loans and/or Financial Assets available to Customer.
2.6 Actual Settlement Date Accounting.
With respect to any sale or purchase transaction that is not
posted to the Account on the contractual settlement date as referred to in
Section 2.5, Bank will post the transaction on the date on which the cash
or Financial Assets received as consideration for the transaction is
actually received by Bank.
6
2.7 Income Collection (Autocredit(R)).
(a) Bank will credit the Cash Account with income and redemption
proceeds on Financial Assets in accordance with the times notified by Bank
from time to time on or after the anticipated payment date, net of any
taxes that are withheld by Bank or any third party. Where no time is
specified for a particular market, income and redemption proceeds from
Financial Assets will be credited only after actual receipt and
reconciliation. Bank may reverse such credits upon oral or written
notification to Customer that Bank believes that the corresponding payment
will not be received by Bank within a reasonable period or such credit was
incorrect.
(b) Bank will make good faith efforts in its discretion to contact
appropriate parties to collect unpaid interest, dividends or redemption
proceeds, but neither Bank nor its Subcustodians will be obliged to file
any formal notice of default, institute legal proceedings, file a proof of
claim in any insolvency proceeding, or take any similar action.
2.8 Certain Ministerial Acts.
(a) Until Bank receives Instructions to the contrary, Bank will:
(i) present all Financial Assets for which Bank has received
notice of a call for redemption or that have otherwise
matured, and all income and interest coupons and other
income items that call for payment upon presentation;
(ii) execute in the name of Customer such certificates as may
be required to obtain payment in respect of Financial
Assets; and
(iii) exchange interim or temporary documents of title held in
the Securities Account for definitive documents of title.
(b) Bank may provide information concerning the Accounts to
Subcustodians, Securities Depositories, counterparties, issuers of
Financial Assets, governmental entities, securities exchanges,
self-regulatory entities, and similar entities to the extent required by
Applicable Law or as may be required in the ordinary course by market
practice or otherwise in order to provide the services contemplated by this
Agreement.
2.9 Corporate Actions.
(a) Bank will promptly notify Customer of any Corporate Action of
which information is either (i) received by it or a Subcustodian to the
extent that Bank's central corporate actions department has actual
knowledge of the Corporate Action in time to notify its customers in a
timely manner; or (ii) published via a formal notice in publications and
reporting services routinely used by Bank for this purpose in time for Bank
to notify its customers in a timely manner. Bank also will use its
reasonable efforts to promptly notify Customer of any class action
litigation for which information is actually received by Bank's central
corporate actions department but shall not be liable for any Liabilities
arising out of Bank's failure to identify Customer's interest in any class
action litigation. Bank does not commit, however, to provide information
concerning Corporate Actions or class action litigation relating to
Financial Assets
7
being held at Customer's request in a name not subject to the control of
Bank or its Subcustodian.
(b) If an Authorized Person fails to provide Bank with timely
Instructions with respect to any Corporate Action or class action, neither
Bank nor its Subcustodians or their respective nominees will take any
action in relation to that Corporate Action or class action, except as
otherwise agreed in writing by Bank and Customer or as may be set forth by
Bank as a default action in the notification it provides under Section 2.9
(a) with respect to that Corporate Action or class action.
(c) Bank may sell or otherwise dispose of fractional interests in
Financial Assets arising out of a Corporate Action or class action
litigation and, to the extent necessary to protect Customer's interest in
that Corporate Action or class action, credit the Cash Account with the
proceeds of the sale or disposition. If some, but not all, of an
outstanding class of Financial Asset is called for redemption, Bank may
allot the amount redeemed among the respective beneficial holders of such
class of Financial Asset in any manner Bank deems to be fair and equitable.
(d) Notices of Corporate Actions and class actions dispatched to
Customer may have been obtained from sources which Bank does not control
and may have been translated or summarized. Although Bank believes such
sources to be reliable, Bank has no duty to verify the information
contained in such notices nor the faithfulness of any translation or
summary and therefore does not guarantee its accuracy, completeness or
timeliness, and shall not be liable to Customer for any loss that may
result from relying on such notice.
2.10 Proxies.
(a) Subject to and upon the terms of this sub-section, Bank will
promptly provide Customer with information which it receives on matters to
be voted upon at meetings of holders of Financial Assets ("Notifications"),
and Bank will act in accordance with Customer's Instructions in relation to
such Notifications ("the active proxy voting service"). If information is
received by Bank at its proxy voting department too late to permit timely
voting by Customer, Bank's only obligation will be to provide, so far as
reasonably practicable, a Notification (or summary information concerning a
Notification) on an "information only" basis.
(b) The active proxy voting service is available only in certain
markets, details of which are available from Bank on request. Provision of
the active proxy voting service is conditional upon receipt by Bank of a
duly completed enrollment form as well as additional documentation that may
be required for certain markets.
(c) Bank will act upon Instructions to vote on matters referred to
in a Notification, provided Instructions are received by Bank at its proxy
voting department by the deadline referred to in the relevant Notification.
If Instructions are not received in a timely manner, Bank will not be
obligated to provide further notice to Customer and shall not be obliged to
vote. It is Customer's obligation to monitor the agreed means of providing
Notifications to determine if new Notifications have been received.
(d) Bank reserves the right to provide Notifications or parts
thereof in the language
8
received. Bank will attempt in good faith to provide accurate and complete
Notifications, whether or not translated.
(e) Customer acknowledges that Notifications and other information
furnished pursuant to the active proxy voting service ("information") are
proprietary to Bank and that Bank owns all intellectual property rights,
including copyrights and patents, embodied therein. Accordingly, Customer
will not make any use of such information except in connection with the
active proxy voting service.
(f) In markets where the active proxy voting service is not
available or where Bank has not received a duly completed enrollment form
or other relevant documentation, Bank will not provide Notifications to
Customer but will endeavor to act upon Instructions to vote on matters
before meetings of holders of Financial Assets where it is reasonably
practicable for Bank (or its Subcustodians or nominees as the case may be)
to do so and where such Instructions are received in time for Bank to take
timely action (the "passive proxy voting service").
(g) Customer acknowledges that the provision of proxy voting
services (whether active or passive) may be precluded or restricted under a
variety of circumstances. These circumstances include, but are not limited
to:
(i) the Financial Assets being on loan or out for
registration,
(ii) the pendency of conversion or another Corporate Action;
(iii) Financial Assets being held at Customer's request in a
name not subject to the control of Bank or its
Subcustodian;
(iv) Financial Assets being held in a margin or collateral
account at Bank or another bank or broker, or otherwise
in a manner which affects voting;
(v) local market regulations or practices, or restrictions by
the issuer; and
(vi) Bank may be required to vote all shares held for a
particular issue for all of Bank's customers on a net
basis (i.e. a net yes or no vote based on voting
instructions received from all its customers). Where this
is the case, Bank will inform Customer by means of the
Notification.
(h) Notwithstanding the fact that Bank may act in a fiduciary
capacity with respect to Customer under other agreements, in performing
active or passive proxy voting services Bank will be acting solely as the
agent of Customer, and will not exercise any discretion, with regard to
such proxy services or vote any proxy except when directed by an Authorized
Person.
2.11 Statements and Information Available On-Line.
(a) Bank will send, or make available on-line, to Customer, at
times mutually agreed upon, a formal statement of account in Bank's
standard format for each Account maintained by Customer with Bank,
identifying the Financial Assets and cash held in each Account (each such
9
statement a "Statement of Account"). Additionally, Bank will send (or make
available on-line to) Customer an advice or notification of any transfers
of cash or Financial Assets with respect to each Account. Bank will not be
liable with respect to any matter set forth in those portions of any
Statement of Account or any such advice (or reasonably implied therefrom)
to which Customer has not given Bank a written exception or objection
within sixty (60) days of receipt of the Statement of Account, provided
such matter is not the result of Bank's willful misconduct or bad faith.
References in this Agreement to Statements of Account include Statements of
Account in electronic form.
(b) Prices and other information obtained from third parties which
may be contained in any Statement of Account or other statement sent to
Customer have been obtained from sources Bank believes to be reliable. Bank
does not, however, make any representation as to the accuracy of such
information or that the prices specified necessarily reflect the proceeds
that would be received on a disposal of the relevant Financial Assets.
(c) Customer acknowledges that, except for Statements of Account
or as otherwise expressly agreed by Bank, records and reports available to
it on-line may not be accurate due to mis-postings, delays in updating
Account records, and other causes. Bank will not be liable for any loss or
damage arising out of the inaccuracy of any such records or reports
accessed on-line.
2.12 Access to Bank's Records.
Bank will allow Customer's independent public accountants such
reasonable access to the records of Bank relating to Financial Assets as is
required in connection with their examination of books and records
pertaining to Customer's affairs. Subject to restrictions under Applicable
Law, Bank also will obtain an undertaking to permit Customer's independent
public accountants, reasonable access to the records of any Subcustodian of
Securities held in the Securities Account as may be required in connection
with such examination.
2.13 Maintenance of Financial Assets at Subcustodian Locations.
(a) Unless Instructions require another location acceptable to
Bank, Financial Assets will be held in the country or jurisdiction in which
their principal trading market is located, where such Financial Assets may
be presented for payment, where such Financial Assets were acquired, or
where such Financial Assets are held. Bank reserves the right to refuse to
accept delivery of Financial Assets or cash in countries and jurisdictions
other than those referred to in Schedule 1 to this Agreement, as in effect
from time to time.
(b) Bank will not be obliged to follow an Instruction to hold
Financial Assets with, or have them registered or recorded in the name of,
any person not chosen by Bank. However, if Customer does instruct Bank to
hold Securities and/or cash with or register or record Securities in the
name of a person not chosen by Bank and Bank agrees to do so, the
consequences of doing so are at Customer's own risk and Bank (i) will not
be liable therefor and (ii) may not provide services under this Agreement
with respect to Securities or cash so held, including, without limitation,
services provided under Sections 2.8, 2.9, 2.10, and 8.2.
10
2.14 Tax Relief Services.
Bank will provide tax relief services as provided in Section 8.2.
2.15 Foreign Exchange Transactions.
To facilitate the administration of Customer's trading and
investment activity, Bank may, but will not be obliged to, enter into spot
or forward foreign exchange contracts with Customer, or an Authorized
Person, and may also provide foreign exchange contracts and facilities
through its Affiliates or Subcustodians. Instructions, including standing
Instructions, may be issued with respect to such contracts, but Bank may
establish rules or limitations concerning any foreign exchange facility
made available. In all cases where Bank, its Affiliates or Subcustodians
enter into a master foreign exchange contract that covers foreign exchange
transactions for the Accounts, the terms and conditions of that foreign
exchange contract and, to the extent not inconsistent, this Agreement, will
apply to such transactions.
3. INSTRUCTIONS
3.1 Acting on Instructions; Unclear Instructions.
(a) Customer authorizes Bank to accept and act upon any
Instructions received by it without inquiry. Customer will indemnify the
Bank Indemnitees against, and hold each of them harmless from, any
Liabilities that may be imposed on, incurred by, or asserted against the
Bank Indemnitees as a result of any action or omission taken in accordance
with any Instructions or other directions upon which Bank is authorized to
rely under the terms of this Agreement.
(b) Unless otherwise expressly provided, all Instructions will
continue in full force and effect until canceled or superseded.
(c) Bank may (in its sole discretion and without affecting any
part of this Section 3.1) seek clarification or confirmation of an
Instruction from an Authorized Person and may decline to act upon an
Instruction if it does not receive clarification or confirmation
satisfactory to it. Bank will not be liable for any loss arising from any
delay while it seeks such clarification or confirmation.
(d) In executing or paying a payment order Bank may rely upon the
identifying number (e.g. Fedwire routing number or account) of any party as
instructed in the payment order. Customer assumes full responsibility for
any inconsistency between the name and identifying number of any party in
payment orders issued to Bank in Customer's name.
3.2 Confirmation of Oral Instructions/Security Devices.
Any Instructions delivered to Bank by telephone will promptly
thereafter be confirmed in writing by an Authorized Person. Each
confirmation is to be clearly marked "Confirmation." Bank will not be
liable for having followed such Instructions notwithstanding the failure of
an Authorized Person to send such confirmation in writing or the failure of
such confirmation to
11
conform to the telephone Instructions received. Either party may record any
of their telephonic communications. Customer will comply with any security
procedures reasonably required by Bank from time to time with respect to
verification of Instructions. Customer will be responsible for safeguarding
any test keys, identification codes or other security devices that Bank
will make available to Customer or any Authorized Person.
3.3 Instructions; Contrary to Law/Market Practice.
Bank need not act upon Instructions which it reasonably believes
to be contrary to law, regulation or market practice, but Bank will be
under no duty to investigate whether any Instructions comply with
Applicable Law or market practice.
3.4 Cut-off Times.
Bank has established cut-off times for receipt of some categories
of Instruction, which will be made available to Customer. If Bank receives
an Instruction after its established cut-off time, Bank will attempt to act
upon the Instruction on the day requested if Bank deems it practicable to
do so or otherwise as soon as practicable on the next business day.
4. FEES, EXPENSES AND OTHER AMOUNTS OWING TO BANK
4.1 Fees and Expenses.
Customer will pay Bank for its services hereunder the fees set
forth in Schedule A hereto or such other amounts as may be agreed upon in
writing from time to time, together with Bank's reasonable out-of-pocket or
incidental expenses, including, but not limited to, legal fees and tax or
related fees incidental to processing by governmental authorities, issuers,
or their agents. Customer authorizes Bank to deduct amounts owing to it
from the Cash Account, for any such fees or expenses from time to time in
arrears. Bank may increase such fees by not less than thirty days' notice
in writing to Customer. Without prejudice to Bank's other rights, Bank
reserves the right to charge interest on overdue amounts from the due date
until actual payment at such rate as Bank may reasonably determine.
4.2 Overdrafts.
If a debit to any currency in the Cash Account results (or will
result) in a debit balance, then Bank may, in its discretion, (i) advance
an amount equal to the overdraft, (ii) refuse to settle in whole or in part
the transaction causing such debit balance, or (iii) if any such
transaction is posted to the Securities Account, reverse any such posting.
If Bank elects to make such an advance, the advance will be deemed a loan
to Customer, payable on demand, bearing interest at the applicable rate
charged by Bank from time to time, for such overdrafts, from the date of
such advance to the date of payment (both after as well as before judgment)
and otherwise on the terms on which Bank makes similar overdrafts available
from time to time. No prior action or course of dealing on Bank's part with
respect to the settlement of transactions on Customer's behalf will be
asserted by Customer against Bank for Bank's refusal to make advances to
the Cash Account or to settle
12
any transaction for which Customer does not have sufficient available funds
in the applicable currency in the Cash Account.
4.3 Bank's Right Over Securities; Set-off.
(a) Customer grants Bank a security interest in and a lien on the
Financial Assets held in the Securities Account as security for any and all
amounts which are now or become owing to Bank under any provision of this
Agreement, whether or not matured or contingent ("Indebtedness").
(b) Without prejudice to Bank's rights under Applicable Law, Bank
may set off against any Indebtedness any amount in any currency standing to
the credit of any of Customer's accounts (whether deposit or otherwise)
with any Bank branch or office or with any Affiliate of Bank. For this
purpose, Bank shall be entitled to accelerate the maturity of any fixed
term deposits and to effect such currency conversions as may be necessary
at its current rates for the sale and purchase of the relevant currencies.
5. SUBCUSTODIANS, SECURITIES DEPOSITORIES, AND OTHER AGENTS
5.1 Appointment of Subcustodians; Use of Securities Depositories.
(a) Bank is authorized under this Agreement to act through and
hold Customer's Financial Assets with subcustodians, being at the date of
this Agreement the entities listed in Schedule 1 and/or such other entities
as Bank may appoint as subcustodians ("Subcustodians"), provided, however,
that the appointment of any agent or subcustodian shall not relieve the
Bank of any of its responsibilities or liabilities under this Agreement.
Bank will use reasonable care in the selection and continued appointment of
such Subcustodians. Any such Subcustodians shall be a bank or trust company
qualified to act as a custodian under the 1940 Act and the regulations
promulgated thereunder. In addition, Bank and each Subcustodian may deposit
Financial Assets with, and hold Financial Assets in, any securities
depository, settlement system, dematerialized book entry system or similar
system (together a "Securities Depository"), in compliance with any
applicable Federal Reserve Board and SEC rules and regulations (including
Rule 17f-4 under the 0000 Xxx) and on such other terms as such systems
customarily operate and Customer will provide Bank with such documentation
or acknowledgements that Bank may require to hold the Financial Assets in
such systems. In connection with Customer's securities held in a Securities
Depository, for so long as it is required by Rule 17f-4, Bank shall:
(i) deposit Customer's securities in an account that
includes only assets held by Bank for its customers;
(ii) send Customer a confirmation of any transfers to or
from the account of Customer. Where securities are transferred to
Customer's account, Bank shall also, by book-entry or otherwise,
identify as belonging to Customer a quantity of securities in a
fungible bulk of securities: (a) registered in the name of Bank or
its nominee or (b) shown on Bank's account on the books of the
clearing agency, the book-entry system or Bank's agent. For these
purposes, "confirmation" means advice or notice of a transaction.
It is not
13
intended to require preparation by Bank of the confirmation
required of broker-dealers under the Securities Exchange Act of
1934;
(iii) Bank, or its agent which deposits the securities,
will promptly send to Customer reports it receives from the
appropriate Federal Reserve Bank or clearing agency on its
respective system of internal accounting control. Bank and all
agents through which securities are deposited will send to
Customer such reports on their own system of internal accounting
control as Customer may reasonably request.
(b) Any agreement Bank enters into with a Subcustodian for holding
Bank's customers' assets will provide that such assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of such Subcustodian or its creditors except a claim for payment for their
safe custody or administration, or, in the case of cash deposits, except
for liens or rights in favor of creditors of the Subcustodian arising under
bankruptcy, insolvency or similar law, and that the beneficial ownership
thereof will be freely transferable without the payment of money or value
other than for safe custody or administration. Where a Subcustodian
deposits Securities with a Securities Depository, Bank will cause the
Subcustodian to identify on its records as belonging to Bank, as agent, the
Securities shown on the Subcustodian's account at such Securities
Depository. This Section 5.1(b) will not apply to the extent of any special
agreement or arrangement made by Customer with any particular Subcustodian.
(c) Bank will not be liable for any act or omission by (or the
insolvency of) any Securities Depository. In the event Customer incurs a
loss due to the negligence, willful misconduct, or insolvency of a
Securities Depository, Bank will make good faith efforts, in its
discretion, to seek recovery from the Securities Depository, but Bank will
not be obligated to institute legal proceedings, file a proof of claim in
any insolvency proceeding, or take any similar action.
5.2 Liability for Subcustodians.
(a) Subject to Section 7.1(b), Bank will be liable for direct
losses incurred by Customer that result from:
(i) the failure by a Subcustodian to use reasonable care
in the provision of custodial services by it in accordance with
the standards prevailing in the relevant market or from the fraud
or willful misconduct of such Subcustodian in the provision of
custodial services by it; or
(ii) the insolvency of any Affiliated Subcustodian.
(b) Subject to Section 5.1(a) and Bank's duty to use reasonable
care in the monitoring of a Subcustodian's financial condition as reflected
in its published financial statements and other publicly available
financial information concerning it customarily reviewed by Bank in its
oversight process, Bank will not be responsible for the insolvency of any
Subcustodian which is not a branch or an Affiliated Subcustodian.
14
(c) Bank reserves the right to add, replace or remove
Subcustodians. Bank will give prompt notice of any such action, which will
be advance notice if practicable. Upon request by Customer, Bank will
identify the name, address and principal place of business of any
Subcustodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
5.3 Use of Agents.
(a) Bank may provide certain services under this Agreement through
third parties, which may be Affiliates. Except to the extent provided in
Section 5.2 with respect to Subcustodians, Bank will not be responsible for
any loss as a result of a failure by any broker or any other third party
that it selects and retains using reasonable care to provide ancillary
services that it may not customarily provide itself, including, without
limitation, delivery services and providers of information regarding
matters such as pricing, proxy voting, Corporate Actions and class action
litigation. Nevertheless, Bank will be liable for the performance of any
such broker selected by Bank that is an Affiliate to the same extent as
Bank would have been liable if it performed such services itself.
(b) In the case of the sale under Section 2.9(c) of a fractional
interest (or in other cases where Customer has requested Bank to arrange
for execution of a trade) Bank will place trades with a broker which is an
Affiliate to the extent that Bank has established a program for such
trading with such Affiliate. An affiliated broker may charge its customary
commission (or retain its customary spread) with respect to any such
transaction.
6. ADDITIONAL PROVISIONS RELATING TO CUSTOMER
6.1 Representations of Customer and Bank.
(a) Customer represents and warrants that (i) it has full
authority and power, and has obtained all necessary authorizations and
consents, to deposit and control the Financial Assets and cash in the
Accounts, to use Bank as its custodian in accordance with the terms of this
Agreement, to borrow money or otherwise incur indebtedness as contemplated
by this Agreement, to pledge Financial Assets as contemplated by Section
4.3, and to enter into foreign exchange transactions; (ii) assuming
execution and delivery of this Agreement by Bank, this Agreement is
Customer's legal, valid and binding obligation, enforceable in accordance
with its terms and it has full power and authority to enter into and has
taken all necessary corporate action to authorize the execution of this
Agreement (iii) it has not relied on any oral or written representation
made by Bank or any person on its behalf, and acknowledges that this
Agreement sets out to the fullest extent the duties of Bank; and (iv) it is
a resident of the United States and shall notify Bank of any changes in
residency.
(b) Bank represents and warrants that (i) assuming execution and
delivery of this Agreement by Customer, this Agreement is Bank's legal,
valid and binding obligation, enforceable in accordance with its terms,
(ii) it has full power and authority to enter into and has taken all
necessary corporate action to authorize the execution of this Agreement and
(iii) it is a "bank" within the meaning of Section 26(a) of the 1940 Act,
as amended.
15
Bank may rely upon the above or the certification of such other facts as
may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising
directly or indirectly from any such certifications.
6.2 Customer to Provide Certain Information to Bank.
Upon request, Customer will promptly provide to Bank such
information about itself and its financial status as Bank may reasonably
request, including Customer's organizational documents and its current
audited and unaudited financial statements.
6.3 Customer is Liable to Bank Even if it is Acting for Another Person.
If Customer is acting as an agent for a disclosed or undisclosed
principal in respect of any transaction, cash, or Financial Asset, Bank
nevertheless will treat Customer as its principal for all purposes under
this Agreement. In this regard, Customer will be liable to Bank as a
principal in respect of any transactions relating to the Account. The
foregoing will not affect any rights Bank might have against Customer's
principal.
7. WHEN BANK IS LIABLE TO CUSTOMER
7.1 Standard of Care; Liability.
(a) Bank will use reasonable care in performing its obligations
under this Agreement. Bank will not be in violation of this Agreement with
respect to any matter as to which it has satisfied its obligation of
reasonable care.
(b) Bank will be liable for Customer's direct damages to the
extent they result from Bank's negligence or willful misconduct in
performing its duties as set out in this Agreement and to the extent
provided in Section 5.2(a). Nevertheless, under no circumstances will Bank
be liable for any indirect, incidental, consequential or special damages
(including, without limitation, lost profits) of any form incurred by any
person or entity, whether or not foreseeable and regardless of the type of
action in which such a claim may be brought, with respect to the Accounts,
Bank's performance hereunder, or Bank's role as custodian.
(c) Customer will indemnify the Bank Indemnitees against, and hold
them harmless from, any Liabilities that may be imposed on, incurred by or
asserted against any of the Bank Indemnitees in connection with or arising
out of (i) Bank's performance under this Agreement, provided the Bank
Indemnitees have not acted with negligence or engaged in fraud or willful
misconduct in connection with the Liabilities in question or (ii) any Bank
Indemnitee's status as a holder of record of Customer's Financial Assets.
Nevertheless, Customer will not be obligated to indemnify any Bank
Indemnitee under the preceding sentence with respect to any Liability for
which Bank is liable under Section 5.2 of this Agreement.
(d) Without limiting Subsections 7.1(a), (b) or (c), Bank will
have no duty or responsibility to: (i) question Instructions or make any
suggestions to Customer or an Authorized
16
Person regarding such Instructions; (ii) supervise or make recommendations
with respect to investments or the retention of Financial Assets; (iii)
advise Customer or an Authorized Person regarding any default in the
payment of principal or income of any security other than as provided in
Section 2.7(b) of this Agreement; (iv) evaluate or report to Customer or an
Authorized Person regarding the financial condition of any broker, agent or
other party to which Bank is instructed to deliver Financial Assets or
cash; or (v) review or reconcile trade confirmations received from brokers
(and Customer or its Authorized Persons issuing Instructions will bear any
responsibility to review such confirmations against Instructions issued to
and Statements of Account issued by Bank).
7.2 Force Majeure.
Bank will maintain and update from time to time business
continuation and disaster recovery procedures with respect to its global
custody business that it determines from time to time meet reasonable
commercial standards. Bank will have no liability, however, for any damage,
loss, expense or liability of any nature that Customer may suffer or incur,
caused by an act of God, fire, flood, civil or labor disturbance, war, act
of any governmental authority or other act or threat of any authority (de
jure or de facto), legal constraint, fraud or forgery (except for fraud or
forgery perpetuated by the Bank or any employee of the Bank), malfunction
of equipment or software (except where such malfunction is primarily
attributable to Bank's negligence in maintaining the equipment or
software), failure of or the effect of rules or operations of any external
funds transfer system, inability to obtain or interruption of external
communications facilities, or any cause beyond the reasonable control of
Bank (including without limitation, the non-availability of appropriate
foreign exchange).
7.3 Bank May Consult With Counsel.
Bank will be entitled to rely on, and may act upon the advice of
professional advisers in relation to matters of law, regulation or market
practice (which may be the professional advisers of Customer), and will not
be liable to Customer for any action taken or omitted pursuant to such
advice, provided, however, with respect to the performance of any action
upon such advice, the Custodian shall be required to conform to the
Standard of Care.
7.4 Bank Provides Diverse Financial Services and May Generate Profits
as a Result.
Customer acknowledges that Bank or its Affiliates may have a
material interest in transactions entered into by Customer with respect to
the Account or that circumstances are such that Bank may have a potential
conflict of duty or interest. For example, Bank or its Affiliates may act
as a market maker in the Financial Assets to which Instructions relate,
provide brokerage services to other customers, act as financial adviser to
the issuer of such Financial Assets, act in the same transaction as agent
for more than one customer, have a material interest in the issue of the
Financial Assets; or earn profits from any of these activities. Customer
further acknowledges that Bank or its Affiliates may be in possession of
information tending to show that the Instructions received may not be in
the best interests of Customer but that Bank is not under any duty to
disclose any such information.
17
8. TAXATION
8.1 Tax Obligations.
(a) Customer confirms that Bank is authorized to deduct from any
cash received or credited to the Cash Account any taxes or levies required
by any revenue or governmental authority for whatever reason in respect of
Customer's Accounts.
(b) Customer will provide to Bank such certifications,
documentation, and information as it may require in connection with
taxation, and warrants that, when given, this information is true and
correct in every respect, not misleading in any way, and contains all
material information. Customer undertakes to notify Bank immediately if any
information requires updating or correcting. Bank shall not be liable for
any taxes, penalties, interest or additions to tax, payable or paid that
result from (i) the inaccurate completion of documents by Customer or any
third party; (ii) the provision to Bank or a third party of inaccurate or
misleading information by Customer or any third party; (iii) the
withholding of material information by Customer or any third party; or (iv)
as a result of any delay by any revenue authority or any other cause beyond
Bank's control.
(c) If Bank does not receive appropriate certifications,
documentation and information then, as and when appropriate and required,
additional tax shall be deducted from all income received in respect of the
Financial Assets issued (including, but not limited to, United States
non-resident alien tax and/or backup withholding tax which shall be
deducted from United States source income).
(d) Customer will be responsible in all events for the timely
payment of all taxes relating to the Financial Assets in the Securities
Account. Customer will indemnify and hold Bank harmless from and against
any and all liabilities, penalties, interest or additions to tax with
respect to or resulting from, any delay in, or failure by, Bank (i) to pay,
withhold or report any U.S. federal, state or local taxes or foreign taxes
imposed on, or (ii) to report interest, dividend or other income paid or
credited to the Cash Account, regardless of the reason for such delay or
failure, provided, however, that Customer will not be liable to Bank for
any penalty or additions to tax due solely as a result of Bank's negligent
acts or omissions with respect to paying or withholding tax or reporting
interest, dividend or other income paid or credited to the Cash Account.
8.2 Tax Relief Services.
(a) Subject to the provisions of this Section, Bank will apply for
a reduction of withholding tax and any refund of any tax paid or tax
credits in respect of income payments on Financial Assets credited to the
Securities Account that Bank believes may be available. To defray expenses
pertaining to nominal tax claims, Bank may from time-to-time set minimum
thresholds as to a de minimus value of tax reclaims or reduction of
withholding which it will pursue in respect of income payments under this
section.
(b) The provision of a tax relief service by Bank is conditional
upon Bank receiving from Customer (i) a declaration of its identity and
place of residence and (ii) certain other
18
documentation (pro forma copies of which are available from Bank), prior to
the receipt of Financial Assets in the Account or the payment of income.
(c) Bank will perform tax relief services only with respect to
taxation levied by the revenue authorities of the countries advised to
Customer from time to time and Bank may, by notification in writing, in its
absolute discretion, supplement or amend the countries in which the tax
relief services are offered. Other than as expressly provided in this
Section 8.2, Bank will have no responsibility with regard to Customer's tax
position or status in any jurisdiction.
(d) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental entity
in relation to the processing of any tax relief claim.
9. TERMINATION
Either party may terminate this Agreement on sixty (60) days'
written notice to the other party. If Customer gives notice of termination,
it must provide full details of the persons to whom Bank must deliver
Financial Assets and cash. If Bank gives notice of termination, then
Customer must, within sixty days, notify Bank of details of its new
custodian, failing which Bank may elect (at any time after the sixty day
notice period) either to retain the Financial Assets and cash until such
details are given, continuing to charge fees due (in which case Bank's sole
obligation will be for the safekeeping of the Financial Assets and cash),
or deliver the Financial Assets and cash to Customer. Bank will in any
event be entitled to deduct any amounts owing to it prior to delivery of
the Financial Assets and cash (and, accordingly, Bank will be entitled to
sell Financial Assets and apply the sale proceeds in satisfaction of
amounts owing to it). Customer will reimburse Bank promptly for all
out-of-pocket expenses it incurs in delivering Financial Assets upon
termination. Termination will not affect any of the liabilities either
party owes to the other arising under this Agreement prior to such
termination.
10. MISCELLANEOUS
10.1 Notices.
Notices (other than Instructions) will be served by registered
mail or hand delivery to the address of the respective parties as set out
on the first page of this Agreement, unless notice of a new address is
given to the other party in writing. Notice will not be deemed to be given
unless it has been received.
10.2 Successors and Assigns.
This Agreement will be binding on each of the parties' successors
and assigns, but the parties agree that neither party can assign its rights
and obligations under this Agreement without the prior written consent of
the other party, which consent will not be unreasonably withheld.
19
10.3 Interpretation.
Headings are for convenience only and are not intended to affect
interpretation. References to sections are to sections of this Agreement
and references to sub-sections and paragraphs are to sub-sections of the
sections and paragraphs of the sub-sections in which they appear.
10.4 Entire Agreement.
(a) The following Rider(s) are incorporated into this Agreement:
___ Cash Trade Execution;
___ Cash Sweep;
___ Accounting Services;
___ Investment Company.
(b) This Agreement, including the Schedules, Exhibits, and Riders
(and any separate agreement which Bank and Customer may enter into with
respect to any Cash Account), sets out the entire Agreement between the
parties in connection with the subject matter, and this Agreement
supersedes any other agreement, statement, or representation relating to
custody, whether oral or written. Amendments must be in writing and signed
by both parties.
10.5 Information Concerning Deposits at Bank's London Branch.
Under U.S federal law, deposit accounts that Customer maintains in
Bank's foreign branches (outside of the U.S.) are not insured by the
Federal Deposit Insurance Corporation ("FDIC"); in the event of Bank's
liquidation, foreign branch deposits have a lesser preference than U.S.
deposits; and such foreign deposits are subject to cross-border risks.
However, Bank's London Branch is a member of the United Kingdom Deposit
Protection Scheme (the "Scheme") established under Banking Xxx 0000 (as
amended). This Scheme provides that in the event of Bank's insolvency
payments may be made to certain customers of Bank's London Branch. Payments
under the Scheme are limited to 90% of a depositor's total cash deposits
subject to a maximum payment to any one depositor of (pound)18,000 (or
20,000 euros if greater). Most deposits denominated in sterling and other
European Economic Area Currencies and euro made with Bank within the United
Kingdom are covered. Further details of the Scheme are available on
request.
10.6 Insurance.
Bank will not be required to maintain any insurance coverage for
the benefit of Customer.
10.7 Governing Law and Jurisdiction.
This Agreement will be construed, regulated, and administered
under the laws of the United States or State of New York, as applicable,
without regard to New York's principles regarding conflict of laws. The
United States District Court for the Southern District of New
20
York will have the sole and exclusive jurisdiction over any lawsuit or
other judicial proceeding relating to or arising from this Agreement. If
that court lacks federal subject matter jurisdiction, the Supreme Court of
the State of New York, New York County will have sole and exclusive
jurisdiction. Either of these courts will have proper venue for any such
lawsuit or judicial proceeding, and the parties waive any objection to
venue or their convenience as a forum. The parties agree to submit to the
jurisdiction of any of the courts specified and to accept service of
process to vest personal jurisdiction over them in any of these courts. The
parties further hereby knowingly, voluntarily and intentionally waive, to
the fullest extent permitted by Applicable Law, any right to a trial by
jury with respect to any such lawsuit or judicial proceeding arising or
relating to this Agreement or the transactions contemplated hereby. To the
extent that in any jurisdiction Customer may now or hereafter be entitled
to claim, for itself or its assets, immunity from suit, execution,
attachment (before or after judgment) or other legal process, Customer
shall not claim, and it hereby irrevocably waives, such immunity.
10.8 Severability; Waiver; and Survival.
(a) If one or more provisions of this Agreement are held invalid,
illegal or unenforceable in any respect on the basis of any particular
circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way
be affected or impaired.
(b) Except as otherwise provided herein, no failure or delay on
the part of either party in exercising any power or right hereunder
operates as a waiver, nor does any single or partial exercise of any power
or right preclude any other or further exercise, or the exercise of any
other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless it is in
writing and signed by the party against whom the waiver is to be enforced.
(c) Bank's rights, protections, and remedies under this Agreement
shall survive its termination.
10.9 Counterparts.
This Agreement may be executed in several counterparts each of
which will be deemed to be an original and together will constitute one and
the same agreement.
21
10.10 No Third Party Beneficiaries.
A person who is not a party to this Agreement shall have no right
to enforce any term of this Agreement.
FORTRESS INVESTMENT TRUST II
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------
Title: Chief Financial Officerr
and Treasurer
Date: September 27, 2002
JPMORGAN CHASE BANK
By: /s/ Xxxxxx Xxxxxxxx
------------------------------
Title: Senior VP
Date: September 27, 2002
Investment Company Rider to Global Custody Agreement
Between JPMorgan Chase Bank and
Fortress Investment Trust II
effective September 27, 2002
The following modifications are made to the Agreement:
"2.16. Compliance with Securities and Exchange Commission ("SEC")
rule 17f-5 ("rule 17f-5").
(a) Customer's board of directors (or equivalent body)
(hereinafter 'Board') hereby delegates to Bank, and, except as to the
country or countries as to which Bank may, from time to time, advise
Customer that it does not accept such delegation, Bank hereby accepts the
delegation to it, of the obligation to perform as Customer's 'Foreign
Custody Manager' (as that term is defined in rule 17f-5(a)(3) as
promulgated under the Investment Company Act of 1940, as amended ("1940
Act")), including for the purposes of: (i) selecting Eligible Foreign
Custodians (as that term is defined in rule 17f-5(a)(1), and as the same
may be amended from time to time, or that have otherwise been exempted
pursuant to an SEC exemptive order) to hold foreign Financial Assets and
Cash, (ii) evaluating the contractual arrangements with such Eligible
Foreign Custodians (as set forth in rule 17f-5(c)(2)), (iii) monitoring
such foreign custody arrangements (as set forth in rule 17f-5(c)(3)).
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the
placement of Financial Assets and Cash with particular Eligible
Foreign Custodians and of any material change in the arrangements
with such Eligible Foreign Custodians, with such reports to be
provided to Customer's Board at such times as the Board deems
reasonable and appropriate based on the circumstances of
Customer's foreign custody arrangements (and until further notice
from Customer such reports shall be provided not less than
quarterly with respect to the placement of Financial Assets and
Cash with particular Eligible Foreign Custodians and with
reasonable promptness upon the occurrence of any material change
in the arrangements with such Eligible Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person
having responsibility for the safekeeping of foreign Financial
Assets and cash would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have
determined that foreign Financial Assets and cash placed and
maintained in the safekeeping of such Eligible Foreign Custodian
shall be subject to reasonable care, based on the standards
applicable to custodians in the relevant market, after having
considered all factors relevant to the
safekeeping of such foreign Financial Assets and cash, including,
without limitation, those factors set forth in rule
17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with an Eligible Foreign
Custodian requires that the Eligible Foreign Custodian shall
provide reasonable care for foreign Financial Assets and Cash
based on the standards applicable to custodians in the relevant
market.
(v) have established a system to monitor the continued
appropriateness of maintaining foreign Financial Assets and cash
with particular Eligible Foreign Custodians and of the governing
contractual arrangements; it being understood, however, that in
the event that Bank shall have determined that the existing
Eligible Foreign Custodian in a given country would no longer
afford foreign Financial Assets and cash reasonable care and that
no other Eligible Foreign Custodian in that country would afford
reasonable care, Bank shall promptly so advise Customer and shall
then act in accordance with the Instructions of Customer with
respect to the disposition of the affected foreign Financial
Assets and cash.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and
maintain foreign Financial Assets and cash on behalf of Customer with
Eligible Foreign Custodians pursuant to a written contract deemed
appropriate by Bank.
(c) Except as expressly delegated to Bank or otherwise provided
herein, Customer shall be solely responsible to assure that the maintenance
of foreign Financial Assets and cash hereunder complies with the rules,
regulations, interpretations and exemptive orders as promulgated by or
under the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined
in Rule 17f-5(a)(7). Customer represents to Bank that: (1) the foreign
Financial Assets and cash being placed and maintained in Bank's custody are
subject to the 1940 Act, as the same may be amended from time to time; (2)
its Board: (i) has determined that it is reasonable to rely on Bank to
perform as Customer's Foreign Custody Manager (ii) or its investment
adviser shall have determined that Customer may maintain foreign Financial
Assets and cash in each country in which Customer's Financial Assets and
cash shall be held hereunder and determined to accept Country Risk. Nothing
contained herein shall require Bank to make any selection or to engage in
any monitoring on behalf of Customer that would entail consideration of
Country Risk.
(e) Bank shall provide to Customer such information relating to
Country Risk as is specified in Appendix 1 hereto. Customer hereby
acknowledges that: (i) such information is solely designed to inform
Customer of market conditions and procedures and is not intended as a
recommendation to invest or not invest in particular markets; and (ii) Bank
has gathered the information from sources it considers reliable, but that
Bank shall have no responsibility for inaccuracies or incomplete
information.
B. Add a new Section 2.17 to the Agreement as follows:
2
2.17. Compliance with SEC rule 17f-7 ("rule 17f-7").
(a) Bank shall, for consideration by Customer, provide an analysis
of the custody risks associated with maintaining Customer's Foreign Assets
with each Eligible Securities Depository used by Bank as of the date hereof
(or, in the case of an Eligible Securities Depository not used by Bank as
of the date hereof, prior to the initial placement of Customer's foreign
Assets at such Depository) and at which any foreign Assets of Customer are
held or are expected to be held. The foregoing analysis will be provided to
Customer at Bank's Website. In connection with the foregoing, Customer
shall notify Bank of any Eligible Securities Depositories at which it does
not choose to have its Foreign Assets held. Bank shall monitor the custody
risks associated with maintaining Customer's foreign Assets at each such
Eligible Securities Depository on a continuing basis and shall promptly
notify Customer or its adviser of any material changes in such risks. The
Bank shall provide the Customer with any report obtained by the Bank on the
Eligible Security Depository's accounting system, internal accounting
control and procedures for safeguarding securities deposited in the
Eligible Securities Depository.
(b) Bank shall exercise reasonable care, prudence and diligence in
performing the requirements set forth in Section 2.17(a) above.
(c) Based on the information available to it in the exercise of
diligence, Bank shall determine the eligibility under rule 17f-7 of each
depository before including it on Schedule 3 hereto and shall promptly
advise Customer if any Eligible Securities Depository ceases to be
eligible. (Eligible Securities Depositories used by Bank as of the date
hereof are set forth in Schedule 3 hereto, and as the same may be amended
on notice to Customer from time to time.)
D. Add the following after the first sentence of Section 5.1(a) of
the Agreement: "At the request of Customer, Bank may, but need not, add to
Schedule 1 an Eligible Foreign Custodian where Bank has not acted as
Foreign Custody Manager with respect to the selection thereof. Bank shall
notify Customer in the event that it elects to add any such entity."
E. Add the following language as Sections 5.1(d) and (e) of the
Agreement:
" (d) The term Subcustodian as used herein shall mean the following:
(i) a 'U.S. Bank,' which shall mean a U.S. bank as defined in
rule 17f5(a)(7);
(ii) an 'Eligible Foreign Custodian,' which shall mean: (i) a
banking institution or trust company, incorporated or
organized under the laws of a country other than the United
States, that is regulated as such by that country's government
or an agency thereof, and (ii) a majority-owned direct or
indirect subsidiary of a U.S. bank or bank holding company
which subsidiary is incorporated or organized under the laws
of a country other than the United States. In addition, an
Eligible Foreign Custodian shall also mean any other entity
that shall have been so qualified by exemptive order, rule or
other appropriate action of the SEC.
3
(iii) For purposes of clarity, it is agreed that as used in
Section 5.2(a), the term Subcustodian shall not include any
Eligible Foreign Custodian as to which Bank has not acted as
Foreign Custody Manager.
(e) The term 'securities depository' as used herein when referring
to a securities depository located outside the U.S. shall mean:
an "Eligible Securities Depository" which, in turn, shall have
the same meaning as in rule 17f-7(b)(1)(i)-(vi) as the same
may be amended from time to time, or that has otherwise been
made exempt pursuant to an SEC exemptive order; provided that,
prior to the compliance date with rule 17f-7 for a particular
securities depository the term "securities depositories" shall
be as defined in (a)(1)(ii)-(iii) of the 1997 amendments to
rule 17f-5.
(f) The term "securities depository" as used herein when referring
to a securities depository located in the U.S. shall mean a "securities
depository" as defined in rule 17f-4(a).
4
Appendix 1-A
Information Regarding Country Risk
1. To aid Customer in its determinations regarding Country Risk,
Bank shall furnish annually and upon the initial placing of Financial
Assets and cash into a country the following information (check items
applicable):
A Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the
access afforded Customer's independent public accountants
to books and records kept by an eligible foreign
custodian located in that country.
___ ii. Whether applicable foreign law would restrict Customer's
ability to recover its Financial Assets and cash in the
event of the bankruptcy of an Eligible Foreign Custodian
located in that country.
___ iii. Whether applicable foreign law would restrict
Customer's ability to recover Financial Assets that are
lost while under the control of an Eligible Foreign
Custodian located in the country.
B. Written information concerning:
___ i. The foreseeability of expropriation, nationalization,
freezes, or confiscation of Customer's Financial Assets.
___ ii. Whether difficulties in converting Customer's cash and
cash equivalents to U.S. dollars are reasonably
foreseeable.]
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement
and registration, (v) taxation, and (vi) depositories (including
depository evaluation), if any.
2. To aid Customer in monitoring Country Risk, Bank shall furnish
board the following additional information:
Market flashes, including with respect to changes in the
information in market reports.
Schedule 2
ELIGIBLE SECURITIES DEPOSITORIES
