EXHIBIT EX-99.G.1
SPECIAL CUSTODY ACCOUNT AGREEMENT
(SHORT SALES)
This Special Custody Account Agreement (this "Agreement"), dated as of
February 14, 2005, by and among Hillview Investment Trust II on behalf of its
REMS Real Estate Value-Opportunity Fund (the "Customer"), a portfolio of a
Delaware statutory trust, with its principal place of business at 000 Xxx Xxxxx
Xxxxxxxx, Xxxxxxx, XX 00000, PFPC Trust Company, a limited purpose trust company
organized under the laws of the State of Delaware with a place of business at
0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxxxxxx, XX (the "Custodian"), and National
Financial Services LLC, organized as a limited liability company under the laws
of Delaware with its principal place of business at 00 Xxxxxxxxxx Xxxxxx,
Xxxxxx, XX ("Broker").
WHEREAS, Customer is a portfolio of an open-end mutual fund registered with
the U.S. Securities and Exchange Commission ("SEC") under the Investment Company
Act of 1940 (as amended from time to time, the "1940 Act"), which is permitted
by applicable law and its own governing documents and investment policies to
purchase and sell securities on margin through broker-dealers;
WHEREAS, Broker is a broker-dealer registered with the SEC under Section 15
of the Securities Exchange Act of 1934 (as amended from time to time, the "1934
Act"), and is a member of the National Association of Securities Dealers, Inc.
("NASD") and several national securities exchanges including the New York Stock
Exchange ("NYSE"), and extends credit to clients such as Customer in accordance
with the provisions of Regulation T of the Board of Governors of the Federal
Reserve System ("Regulation T"), the margin rules of the NASD and NYSE, other
such self-regulatory entities and the various exchanges, and other applicable
margin requirements (collectively, the "Margin Rules");
WHEREAS, Customer desires to execute securities transactions from time to
time through Broker, including primarily, but not limited to, the sale of
securities which the Customer does not own at the time of such sale, using
securities borrowed from or through Broker;
WHEREAS, Customer has agreed to pledge, from time to time, a portion of the
securities which comprise its total portfolio of assets to Broker to secure
performance of Customer's obligations with respect to Short Sales (as defined
below), to execute the Broker's form of margin account application and agreement
and to open a brokerage account with Broker, in which Customer shall be
permitted to trade on margin and to execute Short Sales;
WHEREAS, Custodian has agreed to maintain the Collateral (as defined below)
and certain other assets pursuant to the terms of this Agreement and to open a
Special Custody Account (as defined in Section 2(a) below);
NOW, THEREFORE, Customer, Custodian and Broker hereby agree as follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
(1) "Adequate Margin" means Collateral having such value as is adequate,
under the Margin Rules and in accordance with the internal policies of Broker,
to secure the Secured Obligations. For purposes of this Agreement, Collateral
and other assets maintained in the Special Custody Account shall be valued by
Broker as specified in Section 2(a) below.
(2) "Advice from Broker" or "Advice" means a written notice sent or
transmitted by a facsimile sending device by Broker to Customer or Custodian,
except that the Advice sent to Customer (i) requesting initial or additional
Collateral, or (ii) with respect to Broker's ability to effect a Short Sale for
Customer, may be given orally by Broker to a person designated by Customer in
writing (which shall not be Custodian) as its authorized representative to
receive such Advice (or, in the event such person is not available, to any
officer of the Customer duly authorized thereby for such purposes). With respect
to any Short Sale or Closing Transaction, the Advice from Broker shall mean a
confirmation in the form normally used by Broker for that type of transaction.
An authorized agent of Broker will certify to Customer and Custodian the names
and signatures of Broker's employees who are authorized to sign an Advice from
Broker, which certification may be amended from time to time. Any communication
from a person reasonably believed by the receiving party to be authorized to
provide an Advice from Broker shall be an "Advice from Broker" under this
Agreement. When used herein, the term "Advise" means the act of sending an
Advice from Broker.
(3) "Business Day" shall mean a day on which Custodian, Customer and Broker
are each open for regular business.
(4) "Closing Transaction" is a transaction in which Customer purchases
securities which have previously been sold short by Customer, in order to close
out a Short Sale.
(5) "Collateral" shall mean any Security or Security Entitlement having
loan value under the Margin Rules; subject, however, to Broker's right to value
such Collateral in accordance with Section 2(a) below.
(6) "Control" shall have the meaning assigned to such term in Section 8-106
of Revised Article 8.
(7) "Control Rule" means Rule 15c3-3 (as amended from time to time)
promulgated under the 0000 Xxx.
(8) "Default" has the meaning assigned to that term in Section 5 below.
(9) "DTC" means the Depository Trust Company or any successor thereto.
(10) "DTC Participant" means any Person that is eligible to maintain, and
does maintain, one or more accounts with DTC or a Person having an affiliated
company of such Person who maintains such a DTC account used for such Person.
(11) "Entitlement Holder" shall have the meaning assigned to such term in
Section 8-102(a)(7) of Revised Article 8.
(12) "Entitlement Order" shall have the meaning assigned to such term in
Section 8-102(a)(8) of Revised Article 8.
(13) "Fed" means a Federal Reserve Bank.
(14) "Fed Member" means any Person that is eligible to maintain, and does
maintain, one or more book-entry accounts in the name of such Person with the
Fed or a Person having an affiliated company of such Person who maintains such a
Fed account used for such Person.
(15) "Federal Book Entry Regulations" means the provisions for the creation
and perfection of security interests in Federal Book Entry Securities contained
in (or contained in regulations substantially identical to) Subpart O, 31 C.F.R.
306.115 through 306.122.
(16) "Federal Book Entry Securities" means Collateral and other securities
maintained in the form of entries on the records of the Fed.
(17) "Insolvency" as applied to Customer means that: (i) Customer shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or (ii)(A) any proceeding shall be instituted by or
against Customer seeking (under any law relating to bankruptcy, insolvency or
reorganization, relief of debtors or similar law, whether now or hereafter from
time to time in effect in the United States, any State or political subdivision
thereof or any other jurisdiction) (1) to adjudicate it bankrupt or insolvent or
(2) the liquidation, dissolution, winding-up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts or (3) the
entry of an order for the relief against, or the appointment of a trustee,
receiver, custodian, liquidator or similar official for, it or any substantial
part of its property and (B) in the case of any such proceeding instituted
against it (but not instituted by it) that is being contested by it in good
faith, either such proceeding shall remain un-dismissed or un-stayed for a
period of sixty (60) days or more, or any of the actions sought in such
proceedings (including without limitation, the entry of an order for relief
against, or the appointment of a trustee, receiver, custodian, liquidator or
similar official for, it or any substantial part of its property) shall occur;
or (iii) Customer shall take any corporate or other action to authorize, or
shall approve, consent to or acquiesce in, any of the actions set forth above in
this definition.
(18) "Instruction from Customer " means a request, direction or
certification in writing signed by Customer and delivered to Custodian or Broker
or transmitted thereto by a facsimile sending device. An officer of Customer
will certify to Custodian and Broker the names and signatures of those persons
authorized to sign the Instructions from Customer, which certification may be
amended from time to time by Customer, but shall only become effective with
respect to Instructions from Customer sent to Broker or Custodian when
acknowledged by Broker or Custodian (as applicable). Any communication from a
person reasonably believed by the receiving party to be authorized to provide an
Instruction from Customer shall be an "Instruction from Customer" under this
Agreement.
(19) "Margin Account" means an account opened by Customer with Broker and
approved by Broker for trading on margin, in accordance with the terms of the
Margin Agreement.
(20) "Margin Agreement" means the Broker's form of Margin Account
Application and Agreement, which is entered into between Customer and Broker to
open a Margin Account with Broker.
(21) "NYUCC" means the Uniform Commercial Code, as adopted and enacted and
as then in effect in the State of New York.
(22) "Person" means an individual, partnership, corporation, firm, business
trust, joint stock company, trust, unincorporated or other association, joint
venture, company, division of a corporation, governmental authority or other
entity of whatever nature.
(23) "Revised Article 8" means Article 8 of the NYUCC, as then in effect in
the State of New York.
(24) "Revised Article 9" means Article 9 of the NYUCC, as then in effect in
the State of New York.
(25) "Right" (or "Rights") means any lien, security interest, pledge,
charge, encumbrance, claim, setoff right, ownership or property right, title or
interest (including, without limitation, such as has been obtained by sale,
transfer, assignment, conveyance, contribution, exchange or other disposition)
or other right, title or interest of any kind (including, without limitation,
Broker's Security Interest as provided in Section 2(b) below).
(26) "Secured Obligations" means any and all obligations of Customer to
Broker (whether now existing, or arising from time to time hereafter), under the
terms of the Margin Agreement or this Agreement, which are secured by the
Collateral and other assets in the Special Custody Account.
(27) "Security" (or "Securities") shall have the meaning assigned to that
term in Section 8-102(a)(15) of Revised Article 8; provided, however, that such
terms shall include a Security Entitlement or Security Entitlements except where
otherwise specifically provided or where the context otherwise requires.
(28) "Security Entitlement" shall have the meaning assigned to that term in
Section 8-102(a)(17) of Revised Article 8.
(29) "Security Interest" shall have the meaning assigned to that term in
Section 2(b) below.
(30) "Short Sale" (or Short Sales") shall mean any sale by the Customer of
a security which the Customer does not own or any sale which is consummated by
the delivery of a security borrowed from or through the Broker.
(31) "Uncertificated Security" (or "Uncertificated Securities") shall have
the meaning assigned to that term in Section 8-102(a)(18) of Revised Article 8.
2. SPECIAL CUSTODY ACCOUNT
(a) Opening Special Custody Account. Custodian, in its capacity as a
Securities Intermediary (as defined in Section 8-102(a)14 of Revised Article 8),
shall open a separate special custody account on its books, such account to be
entitled "Special Custody Account for National Financial Services LLC, as
Pledgee of REMS Real Estate Value-Opportunity Fund; Collateral for Margin and
Short Sales Activity" (the "Special Custody Account") and shall hold in the
Special Custody Account, upon the terms of this Agreement, all of the assets
deposited therein (subject to the Security Interest of Broker) and all monies or
other property paid on or distributed with respect thereto (subject, however, to
the rights of the Customer in or to any such monies or property set forth in
Section 4(b) hereof) or realized on the sale of any portion thereof.
The Special Custody Account shall be a Securities Account (as defined in
Section 8-501(a) of Revised Article 8) in the name of the Customer and within
the sole dominion, control and Control of Broker, subject to the terms of this
Agreement. Customer shall deposit Collateral, as required by Broker to meet
Adequate Margin requirements, into the Special Custody Account. Customer agrees
to send an Instruction from Customer to Custodian (and Custodian agrees to
comply with such Instructions from Customer) to deposit the cash (U.S. dollars)
and specific domestic securities which Customer shall be pledging to Broker into
the Special Custody Account, and Custodian agrees (subject to the terms hereof)
to maintain such cash and securities in the Special Custody Account.
Custodian shall (1) identify such deposited cash and securities on its
books and records as being subject to the Security Interest (as defined in
Section 2(b) below) of the Broker, (2) hold such cash and securities as
Securities Intermediary hereunder, (3) treat such cash and securities, for
purposes of Revised Article 8, as Financial Assets (as defined in Section
8-102(a)(9) thereof ), to the extent that Revised Article 8 may be applicable
thereto, and (4) release such cash and securities only in accordance with the
terms of this Agreement or as required by applicable law. The Custodian shall
take such actions with respect to any Collateral and other assets in the Special
Custody Account (including without limitation the delivery thereof to Broker
without the payment of money or value, if so requested by Broker), as Broker
shall, in accordance with the terms hereof, so direct in an Advice from Broker,
and in no event shall any consent of Customer be required for the taking of any
such action by Custodian.
For purposes of this Agreement, Broker shall determine the value of the
Collateral and other assets in the Special Custody Account as it shall determine
from time to time in its sole discretion, and
Broker retains the right to give no value to certain Collateral and other assets
as it may deem necessary for its protection. Customer shall ensure that the
value, as so determined, of the Collateral on deposit at any time in the Special
Custody Account is at least equal to the Adequate Margin for the Secured
Obligations. Customer represents and warrants to Broker that the Collateral
shall be at all times in good, freely deliverable and transferable form (or
Custodian shall have the unrestricted power to put such securities into good,
freely deliverable and transferable form) in accordance with the requirements of
such exchanges and other markets as may be the primary market or markets for
such Collateral.
Notwithstanding anything in this Agreement to the contrary, Customer shall
not deposit or seek to deposit, Broker shall not require to be deposited or
maintained, and Custodian shall not be required to accept or maintain in the
Special Custody Account any assets that are not U.S. dollar denominated.
(b) Security Interest. Customer hereby grants to Broker a continuing lien
on and security interest (the "Security Interest") in: (i) all Collateral and
any proceeds thereof and distributions thereon maintained in the Special Custody
Account; (ii) any other property in the Special Custody Account; and (iii) its
Margin Account and other accounts with Broker (if any), to secure the Customer's
obligations to Broker under this Agreement and the Margin Agreement.
(c) Deposit of Collateral by Customer. Broker shall notify Customer in an
Advice when the value (or type and/or amount, if applicable) of Collateral on
deposit in the Special Custody Account is inadequate to secure Customer's
Secured Obligations. Upon an Advice from Broker that the value (or type and/or
amount, if applicable) of the Collateral in the Special Custody Account is less
than the Adequate Margin for such Secured Obligations, Customer shall promptly
deposit therein additional Collateral with a value sufficient to remedy such
deficiency.
(d) Release of Collateral by Custodian; Excess Collateral. Custodian agrees
to release Collateral or other assets to the Customer from the Special Custody
Account only upon receipt of an Advice from the Broker. Broker shall
periodically and upon request notify Customer and Custodian in an Advice when
the Collateral in the Special Custody Account is in excess of the Adequate
Margin then required for the Secured Obligations. At Customer's or Custodian's
request, Broker shall direct Custodian (via an Advice to Custodian for such
purposes) to transfer (i) such excess Collateral in an amount and value
determined by Broker from the Special Custody Account to another account of
Customer's at Custodian and (ii) any assets in the Special Custody Account other
than Collateral (provided such assets are not required, in Broker's reasonable
judgment, to secure the amount of the Secured Obligations) from the Special
Custody Account to another account of Customer's at Custodian. Notwithstanding
the foregoing, Customer understands that the value of the Collateral remaining
in the Special Custody Account must still constitute Adequate Margin to secure
Broker's Secured Obligations.
(e) Substitution of Collateral. Upon request of the Customer, Broker agrees
to permit an item or items of Collateral in the Special Custody Account to be
released from the Special Custody Account (and shall promptly provide an Advice
from Broker to Custodian for such purposes) upon the deposit into such Special
Custody Account by the Customer of additional Collateral sufficient to maintain
the value of the Collateral in the Special Custody Account in an amount which is
at least equal to
Adequate Margin as determined by Broker. Such Advice will not be given prior to
the deposit of such additional Collateral. The item or items of Collateral so
released by Broker shall be transferred from the Special Custody Account to an
account of Customer at Custodian.
(f) Confirmations. Custodian will make available to Broker and Customer (1)
information confirming, within one Business Day, all pledges, releases or
substitutions of Collateral and all receipts or disbursements of other assets in
the Special Custody Account, and (2) a monthly statement of Collateral and other
assets in the Special Custody Account and the transactions in the Special
Custody Account during the preceding month. Custodian will also make available
to Broker and Customer information regarding the kind and amount of Collateral
and other assets in the Special Custody Account, it being understood that
Custodian shall have no responsibility to value any assets in the Special
Custody Account.
(g) Accounts and Records. Custodian shall maintain accounts and records for
the Collateral and other assets in the Special Custody Account in accordance
with material laws and regulations of governmental authorities with which it is
required to comply and in accordance with its duties under this Agreement.
Custodian confirms and agrees that it will make entries in its books of account
showing Broker's first priority Security Interest in the Collateral and other
assets in the Special Custody Account. The Collateral and other assets in the
Special Custody Account shall be the property of the Customer, but subject to
the rights and interests of the Broker set forth herein.
3. CUSTOMER'S USE OF MARGIN FOR SHORT SALES.
(a) Short Sales. Promptly following execution of this Agreement by the
parties hereto, Customer shall execute a Margin Agreement and shall open a
Margin Account with Broker. From time to time, Customer may place orders in its
Margin Account for Short Sales and may conduct all other activities permitted
therein under the Margin Agreement. Prior to the acceptance of any such orders,
Broker shall advise Customer of Broker's ability to borrow securities, or other
properties if applicable, and acceptance of Short Sale orders by the Broker
shall be contingent thereon.
It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such,
and Customer hereby authorizes Broker to xxxx such order as being "short". When
placing with Broker any order to sell long for Customer's account, Customer will
designate the order as such and hereby authorizes Broker to xxxx such order as
being "long". Any sell order which Customer shall designate as being for its
long account, as provided above, is for securities then owned by Customer. If
such securities are not then deliverable by Broker from any account of Customer,
the placing of such order shall constitute a representation by Customer that it
is impracticable for Customer to deliver such securities to Broker at that time,
but that Customer shall deliver them by the settlement date, or as soon as
possible thereafter (but, in any event, on or before the day required for
delivery under the Margin Rules).
4. RIGHTS AND DUTIES OF CUSTODIAN.
(a) Generally. Custodian shall receive and hold in the Special Custody
Account, as Securities Intermediary and upon the terms of this Agreement, all
Collateral and other assets deposited into the Special Custody Account and,
except as provided in Section 4(b) below, shall receive and hold in the Special
Custody Account property paid on, distributed on or substituted in respect of
such Collateral or other assets or realized on the sale or other disposition of
such Collateral or other assets; provided, however, that Custodian shall have no
duty to require any assets to be delivered to it or to determine that the value,
amount or form of assets delivered to it comply with any applicable
requirements.
Custodian may hold the assets in the Special Custody Account in bearer,
nominee, Federal Book Entry or other book entry form or Security Entitlement or
other form and in DTC or another depository or clearing corporation, with or
without indicating that the assets are being held pursuant to this Agreement;
provided, however, that all Collateral and other assets held in the Special
Custody Account shall be identified on Custodian's records as subject to this
Agreement and Broker's first priority Security Interest therein, and shall be in
a form that permits transfer without additional authorization or consent of
Customer. Customer hereby agrees to hold Custodian and its nominee harmless from
any liability as holder of record of the Collateral or other assets in the
Special Custody Account.
(b) Dividends and Interest. Any dividends paid on, distributions (including
stock, if applicable) made on or interest paid with respect to the Collateral or
other assets held in the Special Custody Account shall, when collected, be paid
by Custodian to Customer or Customer's designee; provided, however, that upon
Advice of Broker to Custodian that a Default, as defined in Section 5 hereof,
has occurred (and so long as Broker shall not have sent an Advice to Custodian
that such Default is no longer continuing), Custodian shall hold or release such
dividends, distributions and interest in accordance with the other terms of this
Agreement.
(c) Security Interest. Custodian shall have no responsibility for the
validity or enforceability of the Security Interest.
(d) Limitation of Custodian's and Broker's Liability. Custodian's duties
and responsibilities are only as set forth in this Agreement. Subject to Section
4(b) above, Custodian shall act only upon receipt of an Advice from Broker
regarding release or substitution of Collateral or other assets in the Special
Custody Account (which Advice will not be unreasonably withheld). Custodian
shall not be liable or responsible for anything done, or omitted to be done, by
it in good faith and in the absence of gross negligence. As between Custodian
and Broker, Broker shall indemnify and hold Custodian harmless with regard to
any losses or liabilities of Custodian (including reasonable counsel fees)
arising out of any act or omission of Custodian in accordance with any notice or
instruction of Broker under this Agreement, including any Advice therefrom,
except for losses or liabilities arising out of Custodian's gross negligence,
recklessness, willful misconduct or bad faith.
Notwithstanding anything in this Agreement to the contrary, Broker shall
have no liability for any special, indirect or consequential damages, whether or
not the likelihood of such loss or damage was known by Broker. Broker shall have
no liability for losses or damages occurring by reasons directly or indirectly
outside of Broker's control. The Customer shall indemnify Custodian for, and
hold it harmless
against, any loss, liability or expense incurred by Custodian (including
reasonable counsel fees) without negligence, willful misfeasance or bad faith on
the part of Custodian. Notwithstanding anything in this Agreement to the
contrary, Custodian shall have no liability for any special, indirect or
consequential damages, whether or not the likelihood of such loss or damages was
known by Custodian. Custodian shall have no liability for loss or damages
occurring by reasons directly or indirectly outside of Custodian's control. In
matters concerning or relating to this Agreement, Custodian shall not be
responsible for compliance with any statute or regulation regarding the
establishment or maintenance of margin credit, including but not limited to
Regulation T and the other Margin Rules, or with any rules or regulations of the
SEC or other regulatory or quasi-regulatory body. Custodian shall not be liable
to any party for any acts or omissions of the other parties to this Agreement
nor for compliance or non-compliance by Broker or Customer with the terms of
this Agreement or for compliance or non-compliance with any other agreement to
which Custodian is not a party. Custodian shall not be required to perform any
duties under this Agreement on days on which it is not open for regular
business.
(e) Compensation. Custodian shall be paid by Customer for its services
pursuant to this Agreement such compensation as may from time to time be agreed
upon in writing between Customer and Custodian.
5. DEFAULT
In the event (each a "Default") of: (i) failure by Customer to perform any
obligation (a) under this Agreement, including, without limitation, the failure
to maintain Adequate Margin in the Special Custody Account as herein required,
or (b) under the Margin Agreement, including, without limitation, the failure to
return to Broker, in a timely manner (as specified in the Margin Agreement
and/or the Margin Rules) identical securities to the ones previously borrowed
from or through Broker by Customer to conduct a Short Sale (whether or not
Customer has received notice of such recall, provided that the Broker has
complied with the terms of the Margin Agreement and the Margin Rules); (ii)
material breach by Customer of any of its representations, warranties or
covenants contained in Section 8 hereof; or (iii) Customer's Insolvency, then,
upon any such Default, Broker shall have the right to:
(1) Effect a Closing Transaction for or a buy-in of any Securities.
(2) Remove any Collateral or other assets from the Special Custody Account
and register such Collateral or other assets in Broker's name or in the name of
Broker's Financial Intermediary, Securities Intermediary, agent or nominee (not
including Custodian) or any of their nominees;
(3) Remove any Collateral or other assets from the Special Custody Account
in order to exercise any voting, conversion, registration, purchase or other
Rights of a holder of any Collateral or other assets in the Special Custody
Account, and any reasonable expense of such exercise shall be deemed to be an
expense of preserving the value of such Collateral and shall constitute a
Secured Obligation hereunder;
(4) Remove any Collateral or other assets from the Special Custody Account
in order to collect, including by legal action, any notes, checks or other
instruments for the payment of money included in
the Collateral or other assets in the Special Custody Account and compromise or
settle with any obligor of such instruments; and
(5) Remove any Collateral or other assets from the Special Custody Account
in order to exercise any and all rights and remedies provided under the Margin
Agreement, Revised Article 8 and Revised Article 9 (or any other applicable
Articles of the NYUCC) or otherwise available to the Broker under applicable
law.
Broker shall not sell any Collateral or other assets held in the Special
Custody Account until and unless there has been a Default, as defined above.
Moreover, Broker shall not be entitled to exercise any right in (2) through (5)
above, and Broker shall not be entitled to instruct Custodian to transfer any
Collateral or other assets in the Special Custody Account to Broker or any
entity claiming through Broker, except upon providing Custodian an Advice from
Broker, stating that the conditions precedent to Broker's right to receive
Collateral (including without limitation all proceeds thereof) and all other
assets in the Special Custody Account free of payment have occurred. Upon
receiving such an Advice from Broker, Custodian shall promptly deliver such
Collateral and other assets free of payment to Broker. Custodian shall also
provide prompt telephone notice to Customer of any receipt by Custodian of such
an Advice from Broker (Custodian's failure to contact Customer, however, shall
not prohibit such delivery of Collateral and other assets to Broker).
Each sale or purchase of Collateral or other assets may be made according
to Broker's judgment and may be made at Broker's discretion, on the principal
exchange or other market on which such Collateral or other assets normally
trades, or in the event such principal exchange or market is closed, in a manner
commercially reasonable for selling such Collateral or other assets.
6. LIMITATION OF BROKER'S LIABILITY TO CUSTOMER
Broker shall not be liable to Customer for any losses, costs, damages,
liabilities or expenses suffered or incurred by Customer as a result of any
transaction executed hereunder, or any other action taken or not taken by Broker
hereunder for Customer's account at Customer's direction or otherwise, except to
the extent that such loss, cost, damage, liability or expense is the result of
Broker's willful misconduct, or bad faith. The Customer shall indemnify Broker
for, and hold it harmless against, any loss, liability or expense incurred by
Broker, without gross negligence, willful misfeasance or bad faith on the part
of Broker.
7. CUSTODIAN'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Custodian represents, warrants and covenants that:
(a) it is duly organized and in good standing as a limited purpose trust
company under the laws of the State of Delaware, and has made and shall continue
to timely make all filings required thereby.
(b) it is, and shall continue to maintain its status as, a limited purpose
trust company under and subject to the applicable requirements of Delaware law
and as a bank, as such term is defined in Section 3(a)(6) of the 1934 Act.
(c) Custodian is and will at all times remain, and will at all times
maintain the Special Custody Account and all Collateral and other assets in the
Special Custody Account in its capacity as, (1) a Financial Intermediary and a
Securities Intermediary having acknowledged Broker's Security Interest, and (2)
as appropriate, a DTC Participant or a Fed Member. Custodian shall maintain all
Collateral in its possession or, as applicable, with the DTC, the Fed or any
such other clearing corporation as Broker may agree upon. Custodian shall assure
(in accordance with industry practice) that all Collateral maintained by
Custodian with or through the DTC or any other clearing corporation (other than
the Fed) is appropriately reflected in Custodian's (or its affiliate's) customer
accounts with the DTC or other such clearing corporation. Custodian shall also
assure (in accordance with industry practice) that all Collateral consisting of
Federal Book Entry Securities is appropriately reflected in Custodian's (or its
affiliate's) customer book entry accounts with the Fed, including, without
limitation, by virtue of the Fed making appropriate entries in its records with
respect to such Collateral, all in accordance with the Federal Book Entry
Regulations.
(d) Custodian shall cause the Special Custody Account and the Collateral
and other assets contained therein to be maintained separately on its books and
records from all other accounts, cash, assets, properties, rights and items
(including, without limitation, any other Special Custody Account and other
Collateral).
(e) This Agreement is the legal, valid and binding obligation of Custodian,
enforceable against Custodian in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and to general principles of equity.
(f) The delivery of the Collateral to the Broker does not require the
payment of money or value to the Custodian and the Custodian acknowledges that
the Collateral in its custody or control is not subject to any right, charge,
security interest, lien or claim of any kind in favor of the Custodian or any
person claiming through the Custodian which right, charge, security interest,
lien or claim is prior to any right, charge, security interest, lien or claim of
Broker with respect thereto. Custodian hereby waives any such prior right,
charge, security interest, lien or right to set-off of any kind which it may
have or acquire with respect to any of the Collateral. Custodian shall use
reasonable efforts to notify Broker and Customer as soon as reasonably possible
if it receives any notice of xxxx, xxxx or court order purporting to affect the
Collateral.
(g) The Special Custody Account is, and shall (and Custodian has taken and
shall continue to take all steps to ensure, in accordance with industry
practice, that such Special Custody Account shall) at all times remain, under
the sole dominion and control of Broker, subject to the terms of this Agreement.
(h) Custodian will treat all Collateral and other assets in the Special
Custody Account as Financial Assets, and will treat Broker as entitled to
exercise any and all Rights, and to benefit from any
and all property interests, that comprise such Financial Assets (including,
without limitation, the Rights and property interests constituting Security
Entitlements with respect to such Financial Assets specified in Part 5 of
Revised Article 8), subject to the terms of this Agreement. Custodian shall hold
all Collateral and other assets in the Special Custody Account for the benefit
of Broker in its capacity as secured party hereunder in accordance with the
terms of this Agreement, shall (subject to the terms of this Agreement) comply
with any and all Entitlement Orders originated by Broker (without further
consent by Customer, any other Entitlement Holder or any other Person), shall
(subject to the terms of this Agreement) accept instructions as to the
disposition of the Collateral and other assets in the Special Custody Account
and any other Entitlement Orders only from Broker and from no other Person
(whether from Customer, any other Entitlement Holder or any other Person), and
shall not release to Customer or any other Person (except as otherwise specified
in this Agreement), dispose of, or pledge, re-pledge, hypothecate or
re-hypothecate, or otherwise apply to the benefit of (except as otherwise
specified in this Agreement) Custodian, Customer, any other Entitlement Holder
or any other Person, any of the Collateral or other assets in the Special
Custody Account without the prior written consent of Broker thereto.
8. CUSTOMER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Customer represents, warrants, and covenants that:
(a)(i) it is duly organized and in good standing as a portfolio of a
statutory trust under the laws of the State of Delaware (ii) it is duly
registered as a portfolio of an investment company under the 1940 act; (iii) it
has all rights, power and authority to enter into this Agreement; (iv) it
conducts its business in accordance with applicable laws and regulations; and
(v) it agrees to notify Broker promptly of any condition that may reasonably be
expected to prevent Customer from fulfilling its obligations hereunder.
(b) Customer is and at all times during the life of this Agreement shall be
the lawful legal or beneficial owner of the Collateral, with full power and
authority to grant the Security Interest to Broker and to bestow upon Broker all
the rights and remedies thereunto appertaining under applicable law or pursuant
to this Agreement, and to sell, transfer, assign, convey, contribute or
otherwise dispose of, subject to the Security Interest, and otherwise to deal
with (in accordance with this Agreement and the Margin Agreement) the Special
Custody Account and the assets therein which may from time to time constitute,
or purport to constitute, Collateral, free of any and all Rights whatsoever
(other than the Security Interest and any rights of Custodian or a party
claiming through Custodian which are secondary to Broker's rights). Securities
pledged to Broker as Collateral shall be in good deliverable form or Custodian
shall have the unrestricted power to put such securities into good deliverable
form, and the Collateral will not be subject to any liens or encumbrances other
than the lien in favor of Broker contemplated hereby and any rights of Custodian
or a party claiming through Custodian which are secondary to Broker's rights.
(c) The Collateral is and will be freely transferable and assignable, and
no portion of the Collateral is or will be subject to any option, right of first
refusal, shareholders agreement, charter or by-law provision, declaration of
trust or other contractual restriction of any nature which might prohibit,
impair, delay or otherwise affect the pledge of the Collateral hereunder, or the
sale or disposition of the Collateral pursuant hereto, after the exercise by
Broker of any of its rights and remedies hereunder.
(d) This Agreement constitutes the legal, valid and binding obligation of
Customer, enforceable against Customer in accordance with its terms.
(e) The Broker has, and will have, a valid and enforceable perfected
first-priority lien on and security interest in the Collateral, securing the
Secured Obligations. Customer has taken and shall continue to take all steps to
ensure that the Special Custody Account is, and will at all times remain, under
the dominion and Control of Broker.
(f) The execution, delivery and performance of this Agreement and the
Margin Agreement, the grant of the Security Interest hereunder and the
consummation of the transactions contemplated hereby or thereby do not and will
not (i) violate any law, rule, regulation, judgment, writ, injunction or order
of any court or governmental authority, in each case applicable to Customer,
(ii) violate or result in the breach of or default under the charter, bylaws or
other organic documents of Customer, or any other agreement to which Customer is
a party or by which any of its properties or the Collateral are bound, or (iii)
violate any restriction on the transfer of any of the Collateral.
(g) No consent, approval, license, permit or authorization of any Person or
any governmental authority is requested or required for the valid execution,
delivery and performance of this Agreement and the Margin Agreement, the
creation and perfection of the Security Interest or the valid and effective
exercise by Broker of the Rights available to it under this Agreement, the
Margin Agreement or at law.
(h) Customer hereby appoints and constitutes Broker, its successors and
assigns as Customer's agents and attorneys-in-fact for the purpose of carrying
out the provisions of this Agreement on behalf of Customer and of taking any
action or executing any instrument on behalf of Customer that Broker considers
necessary or desirable for such purpose, including, whether or not a Default has
occurred, the power to endorse and deliver Securities certificates in the name
and on behalf of Customer, to execute and deliver instructions in the name and
on behalf of Customer to the issuers of Uncertificated Securities and to execute
and file in the name and on behalf of Customer financing statements (which may
be photocopies of this Agreement) and continuations and amendments to financing
statements in any State of the United States, as well as Forms 3, 4, 5 and 144
and Schedules 13D and 13G under the Securities Act of 1933 or the 1934 Act with
the SEC; provided, however, that Broker shall have no obligation to Customer to
make any such filings unless Broker specifically agrees to do so at the request
of Customer, and so informs Customer in an Advice which identifies specifically
which filing Broker shall make and stating that Broker has agreed to make such
filing at Customer's request. If Customer fails to perform any act required by
this Agreement, Broker may perform such act in the name and on behalf of
Customer, at Customer's expense, which shall be chargeable to Customer and shall
constitute a Secured Obligation.
(i) Customer shall not, without the written consent of Broker, take any
action in respect of the Collateral if such action would require the release of,
or would adversely affect, any Collateral, the Security Interest therein or
Broker's rights therein or with respect thereto.
(j) Any Rights that Customer may have in the Collateral shall be subject in
all respects to the Security Interest in accordance with this Agreement.
9. TERMINATION
(a) Any of the parties hereto may terminate this Agreement for any reason
upon thirty (30) days notice in writing to the other parties hereto; provided,
however, that (i) the status of any Short Sales, and of Collateral and other
assets maintained in the Special Custody Account held at the time of such notice
to margin any such Short Sales or other transactions of Customer, shall not be
affected by such termination until such Collateral and other assets held by
Custodian pursuant to this Agreement have been released either in accordance
with the terms of this Agreement or pursuant to applicable law or applicable
rules or regulations of any self-regulatory organization to which Broker is
subject; (ii) Customer shall not be entitled to terminate this Agreement unless
and until Customer shall have indefeasibly paid in full in cash to Broker all
Secured Obligations then outstanding; and (iii) Custodian shall not be entitled
to terminate this Agreement until (A) a successor special custody account has
been established for the Special Custody Account on terms acceptable to Broker,
and the Collateral and other assets in the Special Custody Account have been
delivered to such successor special custody account or (B) Customer's open
positions with Broker secured by Collateral and other assets in the Special
Custody Account on the date of receipt of Custodian's notice of resignation have
been closed out or transferred from Broker to another broker.
(b) The Security Interest shall terminate (i) with respect to Collateral or
other assets released or paid pursuant to this Agreement, upon such release or
payment, and (ii) in any other case, upon the indefeasible payment in full in
cash to Broker of all Secured Obligations then outstanding. Any Collateral or
other assets in which the Security Interest shall have terminated in accordance
with the preceding sentence shall upon advice from Broker be transferred to
Customer's account at Custodian.
(c) Broker and Customer each agrees that it will, at the request of
Custodian, use its best efforts to enter into an agreement with another
custodian acceptable to Broker, and Broker and Customer shall thereafter use
such other custodian to perform the functions of Custodian hereunder with
respect to the transactions effected by Broker on behalf of Customer. If Broker
and Customer have not entered into an agreement with such a successor custodian
within thirty (30) days after such request by Custodian, then on the thirtieth
(30th) day after such request and on the first day of each month thereafter
until Custodian's duties under this Agreement have been transferred to such
successor, Customer shall pay to Custodian $1,000 (in addition to any other fees
and expenses owing by Customer to Custodian with respect to this Agreement). In
addition, Customer shall continue to pay Custodian the compensation agreed upon
pursuant to Section 4(e) above for such period of time until Custodian's duties
under this Agreement have been transferred to such successor.
10. NOTICES
Written communications hereunder shall be sent by facsimile transmission or
hand delivered as required herein, or when another method of delivery is not
specified, may be mailed first class postage
prepaid, except that written notices of termination shall be sent by certified
mail, in each case addressed to the address of the party receiving such notice
at the address set forth below (and permitted oral communications shall be
directed to the telephone number which accompanies such address):
(a) If to Custodian, to: PFPC Trust Company
0000 Xxxxxxx Xxxx., 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile: 000-000-0000
(b) If to Customer, to: REMS Real Estate Value-Opportunity Fund
000 Xxx Xxxxx Xxxxxxxx
Xxxxxxx, XX 00000
Attn: Xxx Xxxxxxx
(c) If to Broker, to: National Financial Services LLC
Attn: Xxxxxx XxXxxx, Senior Vice President
000 Xxxxxxx Xxxxxx (Mailzone NY5W)
Xxx Xxxx, XX 00000
Or, in the case of any party hereto, such other address and/or telephone number
of which such party may notify the other parties hereto, sent to the other
parties in accordance with this Section 10. Notwithstanding anything in this
Agreement to the contrary, no oral instructions shall be provided to or accepted
by Custodian.
11. GOVERNING LAW; JURISDICTION
(a) This Agreement (including, without limitation, the creation, validity,
perfection and priority of the Security Interest) shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflicts of law principles thereof. In furtherance of the
foregoing, Broker, Customer and Custodian agree that, for all purposes of this
Agreement (including for purposes of Section 9-103(6)(e) of Revised Article 9
and Section 8-110 of Revised Article 8), Custodian is the Securities
Intermediary, and the State of New York shall be deemed to be the Security
Intermediary's jurisdiction.
12. REFERENCES TO TIME OF DAY
All reference herein to times of day shall mean the time in New York City,
New York, U.S.A.
13. OTHER AGREEMENTS
In the event of any inconsistency between this Agreement and any other
written, oral or other agreement, discussion or other communication regarding
the subject matter hereof, the terms of this Agreement shall control; provided,
however, that in the event of any disagreement between the terms of
this Agreement and the Margin Agreement concerning the subject matter of the
Margin Agreement, the terms of the Margin Agreement shall control as between
Broker and Customer. Custodian is not a party to the Margin Agreement and shall
not be bound by the terms thereof; Custodian's responsibilities with respect to
the subject matter of this Agreement shall be solely as set forth in this
Agreement.
14. COUNTERPARTS
This Agreement may be executed in any number of counterparts and shall
become effective at such time as all such counterparts have been executed by all
of the parties to this Agreement and have been delivered to the other parties
hereto. Each copy of this Agreement that includes counterparts executed by
another party to this Agreement shall constitute an original hereof.
15. CAPTIONS/HEADINGS
The captions and headings preceding the text of each section herein shall
be disregarded in connection with the interpretation of this Agreement.
16. AMENDMENTS
No amendment of this Agreement shall be effective unless executed by the
party against whom enforcement of such amendment is sought.
17. ARBITRATION
It is agreed by all parties that any controversy between the parties,
arising out of or relating to this Agreement or the transactions contemplated
hereby, shall be settled by arbitration, in accordance with the rules then
obtaining of the NASD applicable to disputes among Members, following a written
demand for arbitration by one party upon the other parties. The award of the
arbitrators shall be final, and judgment upon the award rendered may be entered
in court, state or federal, having jurisdiction.
THE PARTIES ARE AWARE OF THE FOLLOWING:
(A) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
(B) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO A JURY TRIAL.
(C) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND
DIFFERENT FROM COURT PROCEEDINGS.
(D) THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO
SEEK MODIFICATION OF ANY RULING BY THE ARBITRATORS IS STRICTLY
LIMITED.
(E) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE ARBITRATORS WHO
WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION,
NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO
HAS INITIATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER OF A PUTATIVE
CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED
BY THE PUTATIVE CLASS ACTION UNTIL:
(I) THE CLASS CERTIFICATION IS DENIED;
(II) THE CLASS IS DECERTIFIED; OR
(III) CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT.
Such forbearance to enforce an agreement to arbitrate shall not constitute
a waiver of any rights under this Agreement except to the extent stated herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
Hillview Investment Trust II on behalf of its REMS Real Estate Value-Opportunity
Fund
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
PFPC Trust Company
By: /s/ Xxxxxx X. Xxxxx III
---------------------------------
Name: Xxxxxx X. Xxxxx III
Title: Vice President
NATIONAL FINANCIAL SERVICES LLC
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
