CUSTODIAN CONTRACT
Between
U.S. TRUST COMPANY, N.A.
AND
EXCELSIOR ABSOLUTE RETURN
FUND OF FUNDS, LLC
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held by Custodian ................................. 1
2. Duties of the Custodian with Respect to Property of the Fund ................................. 1
2.1 Holding Securities ..................................................................... 1
2.2 Delivery of Securities ................................................................. 1
1) Sale .............................................................................. 2
2) Repurchase Agreements ............................................................. 2
3) Securities System ................................................................. 2
4) Tender Offer ...................................................................... 2
5) Redemption by Issuer .............................................................. 2
6) Transfer to Issuer, Nominee, Exchange ............................................. 2
7) Sale to Broker or Dealer .......................................................... 2
8) Exchange or Conversion ............................................................ 2
9) Warrants, Rights .................................................................. 2
10) Loans of Securities ............................................................... 2
11) Borrowings ........................................................................ 3
12) Options ........................................................................... 3
13) Futures ........................................................................... 3
14) In-Kind Distributions ............................................................. 3
15) Miscellaneous ..................................................................... 3
16) Type of Payment ................................................................... 3
2.3 Registration of Securities ............................................................. 4
2.4 Bank Accounts .......................................................................... 4
2.5 Sale of Interests and Availability of Federal Funds .................................... 4
2.6 Collection of Income, Dividends ........................................................ 4
2.7 Payment of Monies ...................................................................... 5
1) Purchases ......................................................................... 5
2) Exchanges ......................................................................... 5
3) Redemptions ....................................................................... 5
4) Expense and Liability ............................................................. 5
5) Dividends ......................................................................... 5
6) Short Sale Dividend ............................................................... 5
7) Loan .............................................................................. 5
8) Miscellaneous ..................................................................... 5
2.8 Liability for Payment in Advance of Receipt of Securities Purchased .................... 6
2.9 Appointment of Agents .................................................................. 6
2.10 Deposit of Securities in Securities Systems ............................................ 6
1) Account of Custodian .............................................................. 6
2) Records ........................................................................... 6
3) Payment of Monies, Delivery of Securities .............................................. 6
4) Reports ................................................................................ 7
5) Indemnification ........................................................................ 7
2.11 Segregated Account. ......................................................................... 7
2.12 Ownership Certificates for Tax Purposes ..................................................... 7
2.13 Proxies ..................................................................................... 8
2.14 Communications Relating to Portfolio Securities ............................................. 8
2.15 Reports to the Fund ......................................................................... 8
3. Duties of the Custodian with Respect to Property Held Outside of the United States ................ 8
4. Payments for Repurchases or Redemptions and Sales of Interests .................................... 9
5. Proper Instructions ............................................................................... 9
6. Actions Permitted without Express Authority ....................................................... 9
7. Evidence of Authority, Reliance on Documents ...................................................... 10
8. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset
Value and Net Income ............................................................................. 10
9. Records, Inventory ................................................................................ 10
10. Opinion of the Fund's Independent Accountant ...................................................... 11
11. Compensation of Custodian ......................................................................... 11
12. Responsibility of Custodian ....................................................................... 11
13. Effective Period, Termination and Amendment ....................................................... 13
14. Successor Custodian ............................................................................... 13
15. Interpretive and Additional Provisions ............................................................ 14
16. Notice ............................................................................................ 14
17. Bond .............................................................................................. 14
18. Confidentiality ................................................................................... 14
19. Exemption from Liens .............................................................................. 15
20. North Carolina Law to Apply ....................................................................... 15
21. The Parties ....................................................................................... 15
22. Obligations of the Fund ........................................................................... 15
23. Successors of Parties, Assignment ................................................................. 15
24. Miscellaneous ..................................................................................... 15
25. Further Information ............................................................................... 16
CUSTODIAN CONTRACT
This Contract made as of the __th day of June 2003, by and between U.S.
Trust Company, N.A., a Connecticut state chartered bank, having its principal
place of business at Stamford, Connecticut (hereinafter the "Custodian") and
Excelsior Absolute Return Fund of Funds, LLC, a Delaware limited liability
company (the "Fund").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by Custodian
The Fund hereby employs the Custodian as the custodian of the assets of
the Fund, including securities and similar investments such as money market
instruments and futures contracts (collectively, "securities") to be held in
places within the United States pursuant to the Governing Documents (as defined
below) of the Fund. The Fund agrees to deliver to the Custodian all securities
and cash now or hereafter owned or acquired by the Fund, and all payments of
income, payments of principal or capital distributions received by the Fund with
respect to all securities owned by them from time to time, and the cash
consideration received by the Fund for its limited liability company interests
("Interests") as may be issued or sold from time to time. The Custodian shall
not be responsible for any property of the Fund held or received by the Fund and
not delivered to the Custodian.
With respect to securities, upon receipt of "Proper Instructions" (within
the meaning of Article 5), the Custodian may from time to time employ one or
more sub-custodians located in the United States, but only in accordance with an
applicable resolution of the Board of Managers of the Fund (the "Board of
Managers"), and provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions or omissions
of any sub-custodian so employed than any such sub-custodian has to the
Custodian, and further provided that the Custodian shall not release the
sub-custodian from any responsibility or liability unless mutually agreed upon
by the parties in writing.
2. Duties of the Custodian with Respect to Property of the Fund
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, to be held by the
Custodian, including all securities owned by the Fund, other than securities
which are maintained pursuant to Section 2.10 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury (each, a "Securities System")
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by mutual agreement of the
parties, and only in the following cases:
1) Sale. Upon sale of such securities for the account of the Fund
and receipt of payment therefor;
2) Repurchase Agreements. Upon the receipt of payment in
connection with any repurchase agreement related to such securities entered into
by the Fund;
3) Securities System. In the case of a sale effected through a
Securities System, in accordance with the provisions of Section 2.10 hereof;
4) Tender Offer. To the depository agent or other receiving
agent in connection with tender or other similar offers for Interests;
5) Redemption by Issuer. To the issuer thereof or its agent
when such securities are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) Transfer to Issuer, Nominee, Exchange. To the issuer thereof,
or its agent, for transfer into the name of the Fund or into the name of any
nominee or nominees of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same aggregate
face amount or number of units and bearing the same interest rate, maturity date
and call provisions, if any; provided that, in any such case, the new securities
are to be delivered to the Custodian;
7) Sale to Broker or Dealer. Upon the sale of certificated
securities for the account of the Fund, to a broker or its clearing agent or
dealer, against a receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except as may arise
from the Custodian's failure to act in accordance with its duties as set forth
in Section 12.
8) Exchange or Conversion. For exchange or conversion pursuant to
any plan of merger, consolidation, recapitalization, reorganization, split-up of
shares, change of par value or readjustment of the securities of the issuer of
such securities, or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement provided that, in any such
case, the new securities and cash, if any, are to be delivered to the Custodian;
9) Warrants, Rights. In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
10) Loans of Securities. For delivery in connection with any loans
of securities made by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the Fund, which may be in
the form of cash, obligations issued by the United States government, its
agencies or instrumentalities, or such other property as mutually agreed by the
parties, except that in connection with any loans for which collateral is to
-2-
be credited to the Custodian's account in the book-entry system authorized by
the U.S. Department of the Treasury, the Custodian will not be held liable or
responsible for the delivery of portfolio securities of the Fund prior to the
receipt of such collateral, unless the Custodian fails to act in accordance with
its duties set forth in Article 12;
11) Borrowings. For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed, except where additional collateral is
required to secure a borrowing already made, subject to Proper Instructions,
further securities may be released for that purpose;
12) Options. For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of the
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation, any registered
national securities exchange, any similar organization or organizations, or the
Investment Company Act of 1940, as amended (the "1940 Act"), regarding escrow,
collateral, margin or other arrangements in connection with transactions for the
account of the Fund;
13) Futures. For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract market,
any similar organization or organizations, or the 1940 Act, regarding account
deposits in connection with transactions for the account of the Fund;
14) In-Kind Distributions. Upon receipt of instructions from the
Fund, for delivery to the Fund or to the holders of Interests in connection with
distributions in kind, as may be described from time to time in the Fund's then
current confidential memorandum and its limited liability company agreement as
it may be amended from time to time (the "Governing Documents"), in satisfaction
of requests by holders of Interests for repurchase;
15) Miscellaneous. For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy of a resolution
of the Board of Managers signed by two authorized signatories of the Fund,
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom delivery of such securities shall be made;
and
16) Type of Payment. In any or all of the above cases, payments to
the Fund shall be made in cash, by a certified check upon or a treasurer's or
cashier's check of a bank, by effective bank wire transfer through the Federal
Reserve Wire System or, if appropriate, outside of the Federal Reserve Wire
System and subsequent credit to the custodian account of the Fund, or, in case
of delivery through a Securities System, by book-entry credit by the Securities
System in accordance with its rules, or such other form of payment as may be
mutually agreed by the parties, in all such cases collected funds to be promptly
credited to the Fund.
-3-
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name of the Fund or
the Custodian, or in the name of any nominee of the Fund or of the Custodian, or
in the name or nominee name of any agent appointed pursuant to Section 2.9 or in
the name or nominee name of any sub-custodian appointed pursuant to Article 1.
All securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the United States in the name of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts, subject to the provisions
hereof all cash received by it from or for the account of the Fund, other than
such cash, if any, maintained by the Fund in a bank account established and used
in accordance with Rule 17f-3 under the 1940 Act. Funds held by the Custodian
for the Fund may be deposited for the Fund's credit in the Banking Department of
the Custodian or in such other banks or trust companies as the Custodian may in
its discretion deem necessary or desirable; provided, however, that every such
bank or trust company shall be qualified to act as a custodian under the 1940
Act and that each such bank or trust company (if other than the Custodian or an
affiliate of the Custodian) shall be approved by a majority of the Board of
Managers. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
2.5 Sale of Interests and Availability of Federal Funds. Upon mutual
agreement between the Fund and the Custodian, the Custodian shall make federal
funds available to the Fund as of specified times agreed upon from time to time
by the Fund and the Custodian in the amount of checks received in payment for
Interests which are deposited into the Fund's account, subject to collection.
2.6 Collection of Income, Dividends. The Custodian shall collect on a
timely basis all income and other payments with respect to United States
registered securities held hereunder to which the Fund shall be entitled either
by law or pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to United States bearer
securities if, on the date of payment by the issuer, such securities are held by
the Custodian or its agent pursuant to this Contract, and shall credit such
income or other payments, as collected, to the Fund's custodian account. The
Custodian shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. The Custodian will also receive
and collect all stock dividends, rights and other items of like nature as and
when they become due or payable. Income due the Fund on United States securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or responsibility in
connection therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the timely delivery
to the Custodian of the income to which any Fund is properly entitled.
-4-
2.7 Payment of Monies. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by mutual agreement of the
parties, the Custodian shall pay out monies for the account of the Fund in the
following cases only:
1) Purchases. Upon the purchase of securities, futures contracts
or options on futures contracts for the account of the Fund but only: (a)
against the delivery of such securities, or evidence of title to such futures
contracts or options on futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the United States or abroad
which is qualified under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose in accordance with
Section 2.9 hereof) registered in the name of the Fund or in the name of a
nominee of the Fund or of the Custodian referred to in Section 2.3 hereof or in
other proper form for transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of repurchase agreements entered into between the Fund
on behalf of a Fund and the Custodian, or another bank, or a broker-dealer which
is a member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Fund of securities owned by the Custodian
along with written evidence of the agreement by the Custodian to repurchase such
securities from the Fund; or (d) with respect to investments in a private
investment fund, against prior receipt of a copy of a subscription agreement to
purchase an interest in such fund, which agreement has been completed and
executed by the Fund. All coupon bonds accepted by the Custodian shall have the
coupons attached or shall be accompanied by a check payable on the coupon
payable date for the interest due on such date.
2) Exchanges. In connection with conversion, exchange or
surrender of securities owned by the Fund as set forth in Section 2.2 hereof;
3) Redemptions. For the repurchase by the Fund of Interests as
set forth in Article 4 hereof;
4) Expense and Liability. For the payment of any expense or
liability incurred by the Fund, including but not limited to the following
payments: interest, taxes, management, accounting, transfer agent and legal
fees, and operating expenses of the Fund whether or not such expenses are to be
in whole or part capitalized or treated as deferred expenses;
5) Dividends. For the payment of any dividends or other
distributions to shareholders declared pursuant to the Governing Documents of
the Fund;
6) Short Sale Dividend. For payment of the amount of dividends
received in respect of securities sold short;
7) Loan. For repayment of a loan upon redelivery of pledged
securities and upon surrender of the note(s), if any, evidencing the loan;
8) Miscellaneous. For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy of a resolution
of the Board of Mangers signed
-5-
by two authorized signatories of the Fund, specifying the amount of such
payment, setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. Except when the Custodian is acting in accordance with this Contract
or in accordance with customary securities practices, in any and every case
where payment for the purchase of securities for the account of the Fund is made
by the Custodian in advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank or trust
company, which is itself qualified under the 1940 Act, to act as a custodian, as
its agent to carry out such of the provisions of this Article 2 as the Custodian
may from time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Securities in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Fund in a Securities System that
is a clearing agency registered with the Securities and Exchange Commission (the
"SEC") under Section 17A of the Exchange Act, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, in accordance with applicable rules and
regulations of the Federal Reserve Board and the SEC, if any, subject to the
approval of the Board of Managers and subject to the following provisions:
1) Account of Custodian. The Custodian may keep securities owned
by the Fund in a Securities System provided that such securities are represented
in an account (the "Account") of the Custodian in the Securities System which
shall not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) Records. The records of the Custodian with respect to
securities which are maintained in the Account shall identify by book-entry
those securities belonging to the Fund;
3) Payment of Monies, Delivery of Securities. Subject to Section
2.7, the Custodian shall pay for securities purchased for the account the Fund
upon (i) receipt of advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account of the
Fund. Subject to Section 2.2, the Custodian shall transfer securities sold for
the account of the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all advice from the
Securities System of transfers of securities for the account of the Fund shall
identify the, be maintained for the Fund by the Custodian and be provided to the
Fund at its request. The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in the form of a written advice or
notice and shall furnish to the Fund copies
-6-
of daily transaction sheets reflecting each day's transactions in the Securities
System for the account of the Fund;
4) Reports. Upon the request of the Fund, the Custodian shall
provide the Fund with any report obtained by the Custodian on the Securities
System's accounting system, internal accounting controls and procedures for
safeguarding securities deposited in the Securities System, and further agrees
to provide the Fund with copies of any documentation it has relating to its
arrangements with the Securities Systems as set forth in this Contract or as
otherwise required by the SEC;
5) Indemnification. Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the Fund for any loss or
expense, including reasonable attorneys fees, or damage to the Fund resulting
from use of the Securities System by reason of the negligence or willful
misconduct of the Custodian or any of its agents or of any of its or their
employees or agents or from the unreasonable failure of the Custodian or any
such agent to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may have as a
consequence of any such loss, expense or damage if and to the extent that the
Fund has not been made whole for any such loss, expense or damage.
2.11 Segregated Account. The Custodian shall, upon receipt of Proper
Instructions, which may be of a continuing nature where deemed appropriate by
mutual agreement of the parties, establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with
the provisions of any agreement among the Fund, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold for the account
of the Fund, (iii) for purposes of compliance by the Fund with the procedures
required by 1940 Act Release No. 10666, or any subsequent release, rule or
policy, of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate purposes,
but only, in the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of Managers signed
by two authorized signatories of the Fund, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be proper corporate
purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to portfolio securities of the Fund held by it and in connection with
transfers of such securities.
-7-
2.13 Proxies. If the securities are registered other than in the name
of the Fund or a nominee of the Fund, the Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.14 Communications Relating to Portfolio Securities. The Custodian
shall transmit promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or sold by
the Fund) received by the Custodian from issuers of the securities being held
for the Fund by the Custodian, an agent appointed under Section 2.9, or
sub-custodian appointed under Section 1. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian, an agent appointed under Section 2.9, or
sub-custodian appointed under Section 1 from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Fund desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the Fund shall
notify the Custodian of such desired action at least 48 hours (excluding
holidays and weekends) prior to the time such action must be taken under the
terms of the tender, exchange offer, or other similar transaction, and it will
be the responsibility of the Custodian to timely transmit to the appropriate
person(s) the Fund's notice. Where the Fund does not notify the custodian of its
desired action within the aforesaid 48 hour period, the Custodian shall use its
best efforts to timely transmit the Fund's notice to the appropriate person. It
is expressly noted that the parties may negotiate and agree to alternative
procedures with respect to such 48 hour notice period on a selective and
individual basis.
2.15 Reports to the Fund . The Custodian shall provide the Fund, at
such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting controls and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies existing or arising since the prior examination would be
disclosed by such examination. The reports must describe any material
inadequacies disclosed and, if there are no such inadequacies, the reports shall
so state.
At the end of each calendar quarter and on such other dates as the Fund
may reasonably request, the Custodian shall mail to the Fund, a written
statement of all receipts and disbursements to or from the account or accounts
of the Fund during the quarter or such other period for which such statement is
requested by the Fund.
3. Duties of the Custodian with Respect to Property Held Outside of the
United States
This Contract shall not apply to property of the Fund which is to be held
outside of the United States. Accordingly, the Fund agrees that it shall not
purchase any securities or other assets the custody of which are to be
maintained outside of the United States, and the Custodian
-8-
shall have no responsibilities with respect thereto, unless this Contract is
amended to set forth the terms and conditions pursuant to which any such
securities shall be held.
4. Payments for Repurchases or Redemptions and Sales of Interests
From such funds as may be available for the purpose but subject to the
limitations of the Governing Documents of the Fund and any applicable
resolutions of the Board of Managers pursuant thereto, the Custodian shall, upon
receipt of instructions from the Fund, make funds available for payment to
holders of Interests who have delivered to the Fund a request for repurchase of
their Interests. In connection with the repurchase of Interests, the Custodian
is authorized upon receipt of instructions from the Fund to wire funds to or
through a commercial bank designated by the holder of the Interests being
repurchased.
The Custodian shall receive from the Fund, and deposit as received into
the Fund's account, such payments as are received for Interests issued or sold
from time to time. The Custodian will provide timely notification to the Fund of
any receipt by it of payments for Interests.
5. Proper Instructions
Proper Instructions as used herein means a writing signed or initialed
by one or more person or persons as the Board of Managers shall have from time
to time authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the purpose
for which such action is requested, or shall be a blanket instruction
authorizing specific transactions of a repeated or routine nature. Oral
instructions will be considered Proper Instructions if the Custodian reasonably
and in good faith believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Fund as to the authorization by the Board of Managers
accompanied by a detailed description of procedures approved by the Board of
Managers, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Managers and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the Fund;
and further provided that this provision shall not require the Custodian to
expend or risk its own funds or incur financial liability;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments on the same day as received; and
-9-
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as otherwise
directed by the Board of Managers.
7. Evidence of Authority, Reliance on Documents
The Custodian may conclusively rely, and shall be protected in acting,
upon any instructions, notice, request, consent, certificate or other instrument
or paper reasonably and in good faith believed by it to be genuine and to have
been properly executed by or on behalf of the Fund in accordance with Article 5
hereof. The Custodian may receive and accept a certified copy of a resolution of
the Board of Managers as conclusive evidence (a) of the authority of any person
to act in accordance with such resolution or (b) of any determination or of any
action by the Board of Managers pursuant to the Governing Documents of the Fund
as described in such resolution, and such resolution may be considered as in
full force and effect until receipt by the Custodian of written notice to the
contrary. So long as and to the extent that it is in the exercise of the
standard of care set forth in Article 12 hereof, the Custodian shall not be
responsible for the title, validity or genuineness of any property or evidence
of title thereto received by it or delivered by it pursuant to this Contract and
shall be held harmless in acting upon any notice, request, consent, certificate
or other instrument reasonably believed by it to be genuine and to be signed by
the proper party or parties.
8. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the person or persons appointed by the Board of Managers to keep the books of
account of the and/or compute the net asset value of the Fund or, if directed in
writing to do so by the Fund, shall itself keep such books of account and/or
compute such net asset value per share. The calculations of the net asset value
of the Fund shall be made at the time or times and in the manner described in
the Governing Documents.
9. Records, Inventory
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the 1940 Act, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal and state
tax laws and any other law or administrative rules or procedures which may be
applicable to the Fund. All such records shall be the property of the Fund and,
upon reasonable notice, shall during the regular business hours of the Custodian
be open for inspection and audit by duly authorized officers, employees or
agents of the Fund and employees and agents of the SEC, and, in the event of
termination of this Contract, will be delivered in accordance with Section 14
hereof. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations. The Custodian shall conduct a periodic inventory of all securities
and other property subject to this Contract and provide to the Fund a periodic
reconciliation of the vaulted position of the Fund to the appraised
-10-
position of the Fund. The Custodian will promptly report to the Fund the results
of the reconciliation, indicating any shortages or discrepancies uncovered
thereby, and take appropriate action to remedy any such shortages or
discrepancies.
10. Opinion of the Fund's Independent Accountant
The Custodian shall cooperate with the Fund's independent public
accountants in connection with the annual and other audits of the books and
records of the Fund and take all reasonable action, as the Fund may from time to
time request, to provide from year to year the necessary information to such
accountants for the expression of their opinion without any qualification as to
the scope of their examination, including but not limited to, any opinion in
connection with the annual audit of the Fund's financial statements, preparation
of the Fund's Form N-SAR or other annual reports to the SEC, and with respect to
any other requirements of the SEC.
11. Compensation of Custodian
The compensation of the Custodian shall be payable by the Fund in
quarterly installments based on the market value of the account of the Fund as
of the first business day of the quarter. The Custodian shall be entitled to
compensation for its services and expenses as Custodian in an amount determined
in accordance with the Custodian's rates in effect on the first day of the
calendar quarter with respect to which such compensation is being paid or at
other rates as agreed upon from time to time by the Fund and the Custodian. The
Custodian shall notify the Fund of any change in its rates of compensation at
least thirty days in advance of such change. The Custodian shall also be
entitled to reimbursement for its reasonable out-of-pocket expenses.
12. Responsibility of Custodian
Notwithstanding anything to the contrary in this Agreement, the
Custodian shall be held to the exercise of reasonable care in carrying out the
provisions of this Contract. Provided the Custodian has acted with such care, it
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence or willful
misconduct. The Custodian shall not be liable for any failure or delay in
performance of its obligations under this Contract arising solely out of or
caused solely by any instruction, action or omission of the Fund, or by
circumstances beyond its reasonable control including, without limitation, loss
or malfunctions of utility, transportation, computer (hardware or software) or
communication service provided the Custodian has in place reasonable backup
facilities. In order for the indemnification provision contained in this Section
to apply, it is understood that if in any case the Fund may be asked to
indemnify or save the Custodian harmless, the Fund shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Custodian will use all reasonable care to notify the
Fund promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Fund.
The Fund shall have the option to defend the Custodian against any claim which
may be the subject of this indemnification, and in the event that the Fund so
elects, it will so notify the Custodian, and thereupon the Fund shall take over
complete defense of the claim and the Custodian shall in such situation initiate
no further legal or other expenses for which it shall seek indemnification under
this Section. The Custodian shall in
-11-
no case confess any claim or make any compromise in any case in which the Fund
will be asked to indemnify the Custodian except with the Fund's prior written
consent. Nothing herein shall be construed to limit any right or cause of action
on the part of the Custodian under this Contract which is independent of any
right or cause of action on the part of the Fund. The Custodian shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund or such other counsel as may be agreed to by the parties) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
The Custodian shall only be responsible for the performance of such
duties as are expressly set forth herein or in instructions of the Fund which
are not contrary to the provisions of this Contract and, except to the extent
provided by this Contract, no representation, warranty, covenant or other
obligation of the Custodian shall be implied with respect to the Custodian's
services under this Contract. The Custodian shall not be responsible to any
person for recitals, statements, or warranties or representations of any person
or entity contained herein or in any other document other than those relating to
the Custodian or its personnel, agents or nominees. The Custodian shall not be
bound to ascertain or inquire as to the performance or observance of any of the
terms of any document on the part of the Fund or any other person, except as
otherwise set forth in this Contract and provided that as to any provision of
this Contract requiring compliance with the Governing Documents, the Custodian
shall not be liable for any failure to comply with any provision thereof unless
the Fund has furnished a copy of the Governing Documents containing such
provision to the Custodian. Nothing in this Contract shall be deemed to impose
upon the Custodian any duty to qualify to do business or be licensed in any
jurisdiction other than the State of North Carolina.
In performing its services hereunder, the Custodian is acting solely on
behalf of the Fund, as the Fund's agent. No agency relationship shall be deemed
to be established hereby between the Custodian and any other persons. The Fund
acknowledges that: the Custodian's duties hereunder do not include any
discretionary authority, control or responsibility with respect to the
management or disposition of any investments except as specifically set forth
herein; the Custodian has no authority or responsibility to render investment
advice; and the Custodian is not a fiduciary with respect to Fund or any other
person.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to the Custodian.
If the Fund requires the Custodian to advance cash or securities for
any or in the event that the Custodian or its nominee shall incur or be assessed
any taxes, charges, expenses, assessments, claims or liabilities in connection
with the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
or if custodian fees remain 60 days past due, the Fund hereby grants the
Custodian to the extent permissible under the 1940 Act a security interest in
any property at any time held for the account of the Fund as security therefor
and should the Fund fail to repay the Custodian promptly, or fail to pay
custodian fees within 60 days, the Custodian shall be entitled
-12-
to utilize available cash of the Fund and to dispose of the Fund's assets to the
extent necessary to obtain reimbursement, provided that the Custodian gives the
Fund reasonable notice to repay such cash or securities advanced or to pay fees.
Such notice shall not preclude the Custodian's right to assert any lien under
this provision.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of the date set forth above,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other parties, such termination to take effect
not sooner than sixty days after the date of such delivery or mailing; provided,
however, that the Fund may immediately terminate this Contract upon written
notice to the Custodian in the event of the appointment of a conservator or
receiver for the Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate regulatory agency
or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
14. Successor Custodian
If a successor custodian shall be appointed by the Board of Managers, the
Custodian shall, upon the termination of this Contract and at the cost of the
Fund, deliver to such successor custodian at the office of the Custodian, duly
endorsed and in the form for transfer, all securities, funds and other
properties then held by it hereunder and shall transfer to an account of the
successor custodian all of the securities of the Fund held in Securities
Systems.
In the event that no written order designating a successor custodian or
certified copy of a resolution of the Board of Managers shall have been
delivered to the Custodian on or before the date when any termination of this
Contract shall become effective, then the Custodian shall have the right to
deliver at the cost of the Fund to a bank or trust company, which is a "bank" as
defined in the 1940 Act, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of not
less than $25,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to transfer to an account of
such successor custodian all of the securities of the Fund held in Securities
Systems. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract, and the Custodian shall have no further liability
hereunder, except as otherwise specifically provided by this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the resolution referred to
or of the Board of Managers to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other properties
and the
-13-
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect. If while this Contract is in
force the Fund shall be liquidated pursuant to law, the Custodian shall
distribute, either in cash or (if the Fund so orders) in the portfolio
securities and other assets of the Fund, pro rata among the holders of Interests
of the Fund as certified by the Fund, the property of the Fund which remains
after paying or satisfying all expenses and liabilities of the Fund.
Section 12 hereof shall survive any termination of this Contract.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the parties may from
time to time agree on such provisions interpretive of or in addition to the
provisions of this Contract as may in their joint opinion be consistent with the
general tenor of this Contract. Any such interpretive or additional provisions
shall be in a writing signed by the parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the Governing
Documents. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
16. Notice
Any notice shall be sufficiently given when sent by registered or
certified mail, or by such other means as the parties shall agree, to the other
party at the address of such party set forth below or at such other address as
such party may from time to time specify in writing to the other party. Any
notice to the Fund shall be provided to the Fund at Excelsior Absolute Return
Fund of Funds, LLC, c/o U.S. Trust Hedge Fund Management, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇., ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; and any notice to the Custodian shall be provided to
the Custodian at U.S. Trust Company, N.A., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇.
17. Bond
The Custodian shall, at all times, maintain a bond in such form and
amount as is reasonably acceptable to the Fund which shall be issued by a
reputable fidelity insurance company authorized to do business in the place
where such bond is issued against larceny and embezzlement, covering each
officer and employee of the Custodian who may, singly or jointly with others,
have access to securities or funds of the Fund, either directly or through
authority to receive and carry out any certificate instruction, order request,
note or other instrument required or permitted by this Agreement. The Custodian
agrees that it shall not cancel, terminate or modify such bond insofar as it
adversely affects the Fund except after written notice given to the Fund not
less than 10 days prior to the effective date of such cancellation, termination
or modification. The Custodian shall upon the request of the Fund furnish to the
Fund a copy of each such bond and each amendment thereto.
18. Confidentiality
The Custodian agrees to treat all records and other information relative
to the and its prior, present or future members of the Fund as confidential, and
the Custodian, on behalf of
-14-
itself and its employees, agrees to keep confidential all such information
except, after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where the
Custodian may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
19. Exemption from Liens
Except as specifically set forth in this Contract, the securities and
other assets held by the Custodian for the Fund shall be subject to no lien or
charge of any kind in favor of the Custodian or any person claiming through the
Custodian, but nothing herein shall be deemed to deprive the Custodian of its
right to invoke any and all remedies available at law or equity to collect
amounts due it under this Agreement. Neither the Custodian nor any sub-custodian
appointed pursuant to Section 1 hereof shall have any power or authority to
assign, hypothecate, pledge or otherwise dispose of any securities held by it
for the Fund, except as provided in this Contract.
20. New York Law to Apply
This Contract shall be construed and the provisions hereof interpreted
under and in accordance with laws of the State of New York without reference to
the conflicts of laws principles thereof.
21. The Parties
Any reference in this Contract to "the parties" shall mean the
Custodian and the Fund.
22. Obligations of the Fund
It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the Managers, members, nominees, agents or employees
of the Fund, personally, but shall bind only the property of the Fund, as
provided in the Governing Documents. The execution and delivery of this Contract
has been authorized by the Managers and signed by an authorized signatory of the
Fund, acting as such, and neither such authorization by such Managers nor such
execution and delivery by such authorized signatory shall be deemed to have been
made by any of them but shall bind only the Fund as provided in its Governing
Documents.
23. Successors of Parties, Assignment
This Contract shall be binding on and shall inure to the benefit of the
Fund and the Custodian and their respective successors; provided, however, that
this Contract may not be assigned by any party hereto without the written
consent of the other parties. If any party shall merge or consolidate with or
sell substantially all of its assets to another corporation or business entity,
provided that such other corporation or business entity shall assume without
qualification or limitation all obligations of that party hereunder either by
operation of law or by contract, such assumption shall not be considered a
prohibited assignment of this Contract.
24. Miscellaneous
-15-
If any provision of this Contract is held by a court of competent
jurisdiction to be invalid or unenforceable, the balance of the Contract shall
remain in effect, and if any provision is inapplicable to any person or
circumstances, it shall nevertheless remain applicable to all other persons and
circumstances. This Contract may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument, and either
of the parties hereto may execute this Contract by signing any such counterpart.
25. Further Information
The Fund hereby certifies, under penalties of perjury, that it is a
Delaware limited liability company with its principal place of business at ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, that its correct Employer Identification
Number is ___________________ and it is not subject to "backup withholding"
under the Internal Revenue Code of 1986, as amended, or the rules and
regulations promulgated thereunder because (i) the Fund is exempt from backup
withholding, or (ii) the Fund has not been notified by the Internal Revenue
Service that it is subject to backup withholding as a result of its failure to
report all interest or dividends, or (iii) the Internal Revenue Service has
notified the Fund that it is no longer subject to backup withholding. The Fund
shall promptly notify the Custodian if it becomes subject to backup withholding.
-16-
IN WITNESS WHEREOF, the Fund and the Custodian have each caused this
instrument to be executed in its name and behalf by its duly authorized
representative as of the date first indicated above.
U.S. TRUST COMPANY, N.A.
By: _____________________
Name:
Title:
ATTEST:
_________________________
Name:
Title:
EXCELSIOR ABSOLUTE RETURN FUND OF FUNDS, LLC
By: ____________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Principal Manager
ATTEST:
_________________________
Name:
Title:
-17-