Exhibit 8(a)(2)
CUSTODIAN AGREEMENT
Dated as of April 29, 1996
Between
▇▇▇▇▇▇▇ VARIABLE LIFE INVESTMENT FUND
and
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
TABLE OF CONTENTS
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ARTICLE I
APPOINTMENT OF CUSTODIAN
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
2.1. Safekeeping.................................................... 2
2.2. Manner of Holding Securities................................... 2
2.3. Registered Name; Nominee....................................... 2
2.4. Purchases by the Fund.......................................... 3
2.5. Exchanges of Securities........................................ 4
2.6. Sales of Securities............................................ 4
2.7. Depositary Receipts............................................ 5
2.8. Exercise of Rights; Tender Offers.............................. 5
2.9. Stock Dividends, Rights, Etc................................... 5
2.10. Options........................................................ 6
2.11. Futures and Forward Contracts.................................. 6
2.12. Borrowings..................................................... 7
2.13. Bank Accounts.................................................. 7
2.14. Interest-Bearing Deposits...................................... 8
2.15. Foreign Exchange Transactions................................... 8
2.16. Securities Loans................................................ 9
2.17. Collections..................................................... 9
2.18. Dividends, Distributions and
Redemptions................................................. 10
2.19. Proxies; Communications Relating to
Portfolio Securities........................................ 10
2.20. Bills.......................................................... 11
2.21. Nondiscretionary Details....................................... 11
2.22. Deposit of Fund Assets in Securities
Systems..................................................... 11
2.23. Other Transfers................................................ 12
2.24. Establishment of Segregated Accounts........................... 13
2.25. Custodian Advances............................................. 13
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TABLE OF CONTENTS
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ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
3.1. Proper Instructions and Special
Instructions..................................................14
3.2. Authorized Persons...............................................15
3.3 Persons Having Access to Assets of the Fund .....................15
3.4. Actions of Custodian Based on Proper
Instructions and Special Instructions.........................15
ARTICLE IV
SUBCUSTODIANS
4.1. Domestic Subcustodians...........................................16
4.2. Foreign Subcustodians and Interim
Subcustodians.................................................16
4.3. Termination of a Subcustodian....................................18
4.4. Agents...........................................................18
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
5.1. Standard of Care.................................................19
5.2. Liability of Custodian for Actions of
Other Persons.................................................20
5.3. Indemnification..................................................21
5.4. Investment Limitations...........................................22
5.5. Fund's Right to Proceed..........................................22
ARTICLE VI
RECORDS
6.1. Preparation of Reports...........................................23
6.2. Custodian's Books and Records....................................23
6.3. Opinion of Fund's Independent Certified
Public Accountants............................................24
6.4. Reports of Custodian's Independent
Certified Public Accountants..................................24
6.5. Calculation of Net Asset Value...................................24
6.6. Information Regarding Foreign
Subcustodians and Foreign Depositories........................26
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TABLE OF CONTENTS
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ARTICLE VII
CUSTODIAN FEES
ARTICLE VIII
TERMINATION
ARTICLE IX
MISCELLANEOUS
9.1. Execution of Documents...........................................29
9.2. Entire Agreement.................................................29
9.3. Waivers and Amendments...........................................29
9.4. Captions.........................................................29
9.5. Governing Law....................................................29
9.6. Notices..........................................................29
9.7. Successors and Assigns...........................................30
9.8. Counterparts.....................................................30
9.9. Representative Capacity; Nonrecourse
Obligations...................................................30
Appendix A Procedures Relating to Custodian's Security Interest
Appendix B Subcustodians, Foreign Countries, and Foreign Depositories
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Form of Custodian Agreement
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CUSTODIAN AGREEMENT dated as of April 29, 1996, between ▇▇▇▇▇▇▇
Variable Life Investment Fund (the "Fund"), a Massachusetts business trust, and
▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co. (the "Custodian"), a New York limited partnership.
The Fund is entering into this Agreement on behalf of the International
Portfolio. The Custodian shall treat the assets of each series as a separate
Fund hereunder, and any reference to "Fund" shall refer to a series of the Fund
as the context shall require. In the event the Fund establishes one or more
additional series after the date hereof, with respect to which the Fund desires
to have the Custodian render services as Custodian hereunder, the Fund shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series shall become a Fund or Funds hereunder.
In consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
The Fund hereby employs and appoints the Custodian as a
custodian for the term of and subject to the provisions of this Agreement. The
Fund agrees to deliver to the Custodian all securities, cash and other assets
owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of beneficial interest of the Fund as may be issued or sold from
time to time.
The Custodian shall not be under any duty or obligation to
require the Fund to deliver to it any securities, cash or other assets owned by
the Fund and shall have no responsibility or liability for or on account of
securities, cash or other assets not so delivered. The Fund will deposit with
the Custodian copies of the Declaration of Trust and By-Laws (or comparable
documents) of the Fund and all amendments thereto, and copies of such votes and
other proceedings of the Fund as may be necessary for or convenient to the
Custodian in the performance of its duties.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
The Custodian shall have and perform, or cause to be performed
in accordance with this Agreement, the powers and duties set forth in this
Article II. Pursuant to and in accordance with Article IV, the Custodian may
appoint one or more Subcustodians (as that term is defined in Article IV) to
exercise the powers and perform the duties of the Custodian set forth in this
Article II and, except as the context shall otherwise require, references to the
Custodian in this Article II shall include any Subcustodian so appointed.
2.1. Safekeeping. The Custodian shall keep safely the cash,
securities and other assets of the Fund that have been delivered to the
Custodian and from time to time shall accept delivery of cash, securities and
other assets for safekeeping.
2.2. Manner of Holding Securities. (a) The Custodian shall
hold securities of the Fund (i) by physical possession of the share certificates
or other instruments representing such securities in registered or bearer form,
or the broker's receipts or confirmations for forward contracts, futures
contracts, options and similar contracts and securities, or (ii) in book-entry
form by a Securities System (as that term is defined in section 2.22) or (iii)
by a Foreign Depository (as that term is defined in section 4.2(a)).
(b) The Custodian shall identify securities and other assets
held by it hereunder as being held for the account of the Fund and shall require
each Subcustodian to identify securities and other assets held by such
Subcustodian as being held for the account of the Custodian for the Fund (or, if
authorized by Special Instructions, for customers of the Custodian) or for the
account of another Subcustodian for the Fund (or, if authorized by Special
Instructions, for customers of such Subcustodian); provided that if assets are
held for the account of the Custodian or a Subcustodian for customers of the
Custodian or such Subcustodian, the records of the Custodian shall at all times
indicate the Fund and other customers of the Custodian for which such assets are
held in such account and their respective interests therein.
2.3. Registered Name; Nominee. (a) The Custodian shall hold
registered securities and other assets of the Fund (i) in the name of the
Custodian (including any Subcustodian), the Fund, a Securities System, a Foreign
Depository or any nominee of any such person or (ii) in street certificate form,
so-called, and in any case with or without any indication of fiduciary capacity,
provided that such securities and other assets of the Fund are held in an
account of the Custodian containing only assets of the Fund or only assets held
as fiduciary or custodian for customers.
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(b) Except with respect to securities or other assets which
under local custom and practice generally accepted by Institutional Clients are
held in the investor's name, the Custodian shall not hold registered securities
or other assets in the name of the Fund, and shall require each Subcustodian not
to hold registered securities or other assets in the name of the Fund, unless
the Custodian or such Subcustodian promptly notifies the Fund that such
registered securities are being held in the Fund's name and causes the
Securities System, Foreign Depository, issuer or other relevant person to direct
all correspondence and payments to the address of the Custodian or such
Subcustodian, as the case may be.
2.4. Purchases by the Fund. Upon receipt of Proper
Instructions (as that term is defined in section 3.1(a)) and insofar as funds
are available for the purpose (or as funds are otherwise provided by the
Custodian at its discretion pursuant to section 2.25), the Custodian shall pay
for and receive securities or other assets purchased for the account of the
Fund, payment being made only upon receipt of the securities or other assets (a)
by the Custodian, or (b) by credit to an account which the Custodian may have
with a Securities System, clearing corporation of a national securities
exchange, Foreign Depository or other financial institution approved by the
Fund. Notwithstanding the foregoing, upon receipt of Proper Instructions: (i) in
the case of repurchase agreements entered into by the Fund in a transaction
involving a Securities System or a Foreign Depository, the Custodian may release
funds to the Securities System or Foreign Depository prior to the receipt of
advice from the Securities System or Foreign Depository that the securities
underlying such repurchase agreement have been transferred by book entry into
the Account (as defined in section 2.22) of the Custodian maintained with such
Securities System or similar account with a Foreign Depository, provided that
the instructions of the Custodian to the Securities System or Foreign Depository
require that the Securities System or Foreign Depository, as the case may be,
may make payment of such funds to the other party to the repurchase agreement
only upon transfer by book-entry of the securities underlying the repurchase
agreement into the Account, (ii) in the case of futures and forward contracts,
options and similar securities, foreign currency purchased from third parties,
time deposits, foreign currency call account deposits, and other bank deposits,
and transactions pursuant to sections 2.10, 2.11, 2.13, 2.14 and 2.15, the
Custodian may make payment therefor prior to delivery of the contract, currency,
option or security without receiving an instrument evidencing said contract,
currency, option, security or deposit, and (iii) in the case of the purchase of
securities or other assets the settlement of which occurs outside the United
States of America, the Custodian may make payment therefor and receive delivery
thereof in accordance with local custom and practice generally accepted by
Institutional Clients (as defined below) in the country in which settlement
occurs, provided that in every case the Custodian shall be subject to the
standard of care set forth in Article V and to any Special Instructions given in
accordance with section 3.1(b). Except in the cases provided for in the
immediately preceding sentence, in any case where payment for purchase of
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securities or other assets for the account of the Fund is made by the Custodian
in advance of receipt of the securities or other assets so purchased in the
absence of Proper Instructions to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities or other assets to the same
extent as if the securities or other assets had been received by the Custodian.
For purposes of this Agreement, "Institutional Clients" means U.S. registered
investment companies, or major, U.S.-based commercial banks, insurance
companies, pension funds or substantially similar financial institutions which,
as a substantial part of their business operations, purchase or sell securities
and make use of custodial services.
2.5. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the account
of the Fund for other securities in connection with any reorganization,
recapitalization, split-up of shares, change of par value, conversion or other
event, and to deposit any such securities in accordance with the terms of any
reorganization or protective plan. Without Proper Instructions, the Custodian
may surrender securities in temporary form for definitive securities, may
surrender securities for transfer into a name or nominee name as permitted in
section 2.3, and may surrender securities for a different number of certificates
or instruments representing the same number of shares or same principal amount
of indebtedness, provided that the securities to be issued are to be delivered
to the Custodian.
2.6. Sales of Securities. Upon receipt of Proper Instructions,
the Custodian shall make delivery of securities or other assets which have been
sold for the account of the Fund, but only against payment therefor (a) in cash,
by a certified check, bank cashier's check, bank credit, or bank wire transfer,
or (b) by credit to the account of the Custodian with a Securities System,
clearing corporation of a national securities exchange, Foreign Depository or
other financial institution approved by the Fund by Proper Instructions.
However, (i) in the case of delivery of physical certificates or instruments
representing securities, the Custodian may make delivery to the broker acting as
agent for the buyer of the securities, against receipt therefor, for examination
in accordance with "street delivery" custom, provided that the Custodian shall
have taken reasonable steps to ensure prompt collection of the payment for, or
the return of, such securities by the broker or its clearing agent and (ii) in
the case of the sale of securities or other assets the settlement of which
occurs outside the United States of America, such securities shall be delivered
and paid for in accordance with local custom and practice generally accepted by
Institutional Clients in the country in which settlement occurs, provided that
in every case the Custodian shall be subject to the standard of care set forth
in Article V and to any Special Instructions given in accordance with section
3.1(b). Except in the cases provided for in the immediately preceding sentence,
in any case where delivery of securities or other assets for the account of the
Fund is made by the Custodian in advance of receipt of payment for the
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securities or other assets so sold in the absence of Proper Instructions to so
deliver in advance, the Custodian shall be absolutely liable to the Fund for
such payment to the same extent as if such payment had been received by the
Custodian.
2.7. Depositary Receipts. Upon receipt of Proper Instructions,
the Custodian shall surrender securities to the depositary used by an issuer of
American Depositary Receipts, European Depositary Receipts, Global Depositary
Receipts, International Depositary Receipts and other types of Depositary
Receipts (hereinafter collectively referred to as "ADRs") for such securities
against a written receipt therefor adequately describing such securities and
written evidence satisfactory to the Custodian that the depositary has
acknowledged receipt of instructions to issue ADRs with respect to such
securities in the name of the Custodian, or a nominee of the Custodian, for
delivery to the Custodian in Boston, Massachusetts, or at such other place as
the Custodian may from time to time designate.
Upon receipt of Proper Instructions, the Custodian shall
surrender ADRs to the issuer thereof against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the Custodian that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depositary to deliver the securities underlying such
ADRs to the Custodian.
2.8. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall (a) deliver to the issuer or trustee thereof,
or to the agent of either, warrants, puts, calls, futures contracts, options,
rights or similar securities for the purpose of being exercised or sold,
provided that the new securities and cash, if any, acquired by such action are
to be delivered to the Custodian, and (b) deposit securities upon invitations
for tenders of securities, provided that the consideration is to be paid or
delivered or the tendered securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the Custodian
shall take all necessary action, unless otherwise directed to the contrary by
Proper Instructions, to comply with the terms of all mandatory or compulsory
exchanges, calls, tenders, redemptions or similar rights of security ownership
of which the Custodian receives notice or otherwise becomes aware, and shall
promptly notify the Fund of any such action in writing by facsimile transmission
or in such other manner as the Fund and the Custodian may agree in writing.
2.9. Stock Dividends, Rights, Etc. The Custodian shall receive
and collect all stock dividends, rights and other items of like nature and shall
deal with the same as it would other deposited assets or as directed in Proper
Instructions.
2.10. Options and Swaps. Upon receipt of Proper Instructions
or instructions from a third party properly given under any Procedural
Agreement, the Custodian shall (a) receive and retain confirmations or other
5
documents (to the extent confirmations or other documents are provided to the
Custodian) evidencing the purchase, sale or writing of an option or swap of any
type on or in respect of a security, securities index, currency or similar form
of property by the Fund; (b) deposit and maintain in a segregated account,
either physically or by book-entry in a Securities System or Foreign Depository
or with a broker, dealer or other party designated by the Fund, securities, cash
or other assets in connection with options transactions or swap agreements
entered into by the Fund; (c) transfer securities, cash or other assets to a
Securities System, Foreign Depository, broker, dealer or other party or
organization, as margin (including variation margin) or other security for the
Fund's obligations in respect of an option or swap; and (d) pay, release and/or
transfer such securities, cash or other assets only in accordance with a notice
or other communication evidencing the expiration, termination, exercise of any
such option or default under any such option or swap furnished by The Options
Clearing Corporation, the securities or options exchange on which such option is
traded, or such other organization, party, broker or dealer as may be
responsible for handling such options or swap transactions or have authority to
give such notice or communication under a Procedural Agreement. Subject to the
standard of care set forth in Article V (and to its safekeeping duties set forth
in section 2.1), the Custodian shall not be responsible for the sufficiency of
assets held in any segregated account established and maintained in accordance
with Proper Instructions or instructions from a third party properly given under
any Procedural Agreement or for the performance by the Fund or any third party
of its obligations under any Procedural Agreement. For purposes of this
Agreement, a "Procedural Agreement" is a procedural agreement relating to
options, swaps (including caps, floors and similar arrangements), futures
contracts, forward contracts or borrowings by the Fund to which the Fund, the
Custodian and a third party are parties.
2.11. Futures and Forward Contracts. Upon receipt of Proper
Instructions or instructions from a third party properly given under any
Procedural Agreement, the Custodian shall (a) receive and retain confirmations
or other documents (to the extent confirmations or other documents are provided
to the Custodian) evidencing the purchase or sale of a futures contract or an
option on a futures contract by the Fund or the entry into a forward contract by
the Fund; (b) deposit and maintain in a segregated account, either physically or
by book entry in a Securities System or Foreign Depository, for the benefit of
any futures commission merchant, or pay to such futures commission merchant,
securities, cash or other assets designated by the Fund as initial, maintenance
or variation "margin" deposits intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold or any options on
futures contracts written, purchased or sold by the Fund or any forward
contracts entered into, in accordance with the provisions of any Procedural
Agreement designed to comply with the rules of the Commodity Futures Trading
Commission and/or any contract market, or any similar organization or
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organizations on which such contracts or options are traded; and (c) pay,
release and/or transfer securities, cash or other assets into or out of such
margin accounts only in accordance with any such agreements or rules. Subject to
the standard of care set forth in Article V, the Custodian shall not be
responsible for the sufficiency of assets held in any such margin account
established and maintained in accordance with Proper Instructions or
instructions from a third party properly given under any Procedural Agreement or
for the performance by the Fund or any third party of its obligations under any
Procedural Agreement.
2.12. Borrowings. Upon receipt of Proper Instructions or
instructions from a third party properly given under any Procedural Agreement,
the Custodian shall deliver securities of the Fund to lenders or their agents,
or otherwise establish a segregated account as agreed to by the Fund and the
Custodian, as collateral for borrowings effected by the Fund, but only against
receipt of the amounts borrowed (or to adjust the amount of such collateral in
accordance with the Procedural Agreement), provided that if such collateral is
held in book-entry form by a Securities System or Foreign Depository, such
collateral may be transferred by book-entry to such lender or its agent against
receipt by the Custodian of an undertaking by such lender to pay such borrowed
money to or upon the order of the Fund on the next business day following such
transfer of collateral.
2.13. Bank Accounts. The Custodian shall open and operate one
or more accounts in the name of the Fund on the Custodian's books subject only
to draft or order by the Custodian. All funds received by the Custodian from or
for the account of the Fund shall be deposited in said account(s). The
responsibilities of the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar deposit.
Upon receipt of Proper Instructions, the Custodian may open
and operate additional accounts in such other banks or trust companies,
including any Subcustodian, as may be designated by the Fund in such
instructions (any such bank or trust company other than the Custodian so
designated by the Fund being referred to hereafter as a "Banking Institution"),
provided that any such account shall be in the name of the Custodian for the
account of the Fund (or, if authorized by Special Instructions, for the account
of the Custodian's customers generally) and subject only to the Custodian's
draft or order; provided that if assets are held in such an account for the
account of the Custodian's customers generally, the records of the Custodian
shall at all times indicate the Fund and other customers for which such assets
are held in such account and their respective interests therein. Such accounts
may be opened with Banking Institutions in the United States and in other
countries and may be denominated in U.S. Dollars or such other currencies as the
Fund may determine. So long as the Custodian exercises reasonable care and
diligence in executing Proper Instructions, the Custodian shall have no
7
responsibility for the failure of any Banking Institution to make payment from
such an account upon demand.
2.14. Interest-Bearing Deposits. The Custodian shall place
interest-bearing fixed term and call deposits with such banks and in such
amounts as the Fund may authorize pursuant to Proper Instructions. Such deposits
may be placed with the Custodian or with Subcustodians or other Banking
Institutions as the Fund may determine. Deposits may be denominated in U.S.
Dollars or other currencies, as the Fund may determine, and need not be
evidenced by the issuance or delivery of a certificate to the Custodian,
provided that the Custodian shall include in its records with respect to the
assets of the Fund, appropriate notation as to the amount and currency of each
such deposit, the accepting Banking Institution and all other appropriate
details, and shall retain such forms of advice or receipt evidencing such
deposits as may be forwarded to the Custodian by the Banking Institution in
question. The responsibility of the Custodian for such deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar deposit. With
respect to interest-bearing deposits other than those accepted on the
Custodian's books, (a) the Custodian shall be responsible for the collection of
income as set forth in section 2.17, and (b) so long as the Custodian exercises
reasonable care and diligence in executing Proper Instructions, the Custodian
shall have no responsibility for the failure of any Banking Institution to make
payment in accordance with the terms of such an account. Upon receipt of Proper
Instructions, the Custodian shall take such reasonable steps as the Fund deems
necessary or appropriate to cause such deposits to be insured to the maximum
extent possible by the Federal Deposit Insurance Corporation and any other
applicable deposit insurers.
2.15. Foreign Exchange Transactions. (a) Upon receipt of
Proper Instructions, the Custodian shall settle foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf and for the account of the Fund with such currency brokers or Banking
Institutions as the Fund may direct pursuant to Proper Instructions. The
Custodian shall be responsible for the transmission of cash and instructions to
and from the currency broker or Banking Institution with which the contract or
option is made, the safekeeping of all certificates and other documents and
agreements received by the Custodian evidencing or relating to such foreign
exchange transactions and the maintenance of proper records as set forth in
section 6.2. In connection with such transactions, upon receipt of Proper
Instructions, the Custodian shall be authorized to make free outgoing payments
of cash in the form of U.S. Dollars or foreign currency without receiving
confirmation of a foreign exchange contract or option or confirmation that the
countervalue currency completing the foreign exchange contract has been
delivered or that the option has been delivered or received. The Custodian shall
have no authority to select third party foreign exchange dealers and, so long as
the Custodian exercises reasonable care and diligence in executing Proper
Instructions, shall have no responsibility for the failure of any such dealer to
8
settle any such contract or option in accordance with its terms. The Fund shall
reimburse the Custodian for any interest charges or reasonable out-of-pocket
expenses incurred by the Custodian resulting from the failure or delay of third
party foreign exchange dealers to deliver foreign exchange, other than interest
charges and expenses occasioned by or resulting from the negligence, misfeasance
or misconduct of the Custodian.
(b)The Custodian shall not be obligated to enter into foreign
exchange transactions as principal. However, if the Custodian has made available
to the Fund its services as principal in foreign exchange transactions, upon
receipt of Proper Instructions, the Custodian shall enter into foreign exchange
contracts or options to purchase and sell foreign currencies for spot and future
delivery on behalf of and for the account of the Fund with the Custodian as
principal. The responsibility of the Custodian with respect to foreign exchange
contracts and options executed with the Custodian as principal shall be that of
a U.S. bank with respect to a similar contract or option.
2.16. Securities Loans. Upon receipt of Proper Instructions,
the Custodian shall deliver securities of the Fund, in connection with loans of
securities by the Fund, to the borrower thereof in accordance with the terms of
a written securities lending agreement to which the Fund is a party or which is
otherwise approved by the Fund.
2.17. Collections. The Custodian shall promptly collect,
receive and deposit in the account or accounts referred to in section 2.13 all
income, payments of principal and other payments with respect to the securities
and other assets held hereunder, promptly endorse and deliver any instruments
required to effect such collections and in connection therewith deliver the
certificates or other instruments representing securities to the issuer thereof
or its agent when securities are called, redeemed, retired or otherwise become
payable; provided that the payment is to be made in such form and manner and at
such time, which may be after delivery by the Custodian of the instrument
representing the security, as is in accordance with the terms of the instrument
representing the security, such Proper Instructions as the Custodian may
receive, governmental regulations, the rules of the Securities System or Foreign
Depository in which such security is held or, with respect to securities
referred to in clause (iii) of the second sentence of section 2.4, in accordance
with local custom and practice generally accepted by Institutional Clients in
the market where payment or delivery occurs, but in all events subject to the
standard of care set forth in Article V. The Custodian shall promptly execute
ownership and other certificates and affidavits for all federal, state and
foreign tax purposes in connection with receipt of income or other payments with
respect to securities or other assets of the Fund or in connection with transfer
of securities or other assets. Pursuant to Proper Instructions, the Custodian
shall take such other actions, which may involve an investment decision, as the
9
Fund may request with respect to the collection or receipt of funds or the
transfer of securities. Except in the cases provided for in the first sentence
of this section, in any case where delivery of securities for the account of the
Fund is made by the Custodian in advance of receipt of payment with respect to
such securities in the absence of Proper Instructions to so deliver in advance,
the Custodian shall be absolutely liable to the Fund for such payment to the
same extent as if such payment had been received by the Custodian. The Custodian
shall promptly notify the Fund in writing by facsimile transmission or in such
other manner as the Fund and the Custodian may agree in writing if any amount
payable with respect to securities or other assets of the Fund is not received
by the Custodian when due.
2.18. Dividends, Distributions and Redemptions. Upon receipt
of Proper Instructions, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the Shareholder Servicing Agent as the Fund shall have authorized by Proper
Instructions), the Custodian shall release funds or securities, insofar as
available, to the Shareholder Servicing Agent or as such Shareholder Servicing
Agent shall otherwise instruct (a) for the payment of dividends or other
distributions to Fund shareholders or (b) for payment to the Fund shareholders
who have delivered to such Shareholder Servicing Agent a request for repurchase
or redemption of their shares of beneficial interest in the Fund.
2.19. Proxies; Communications Relating to Portfolio
Securities. The Custodian shall, as promptly as is appropriate under the
circumstances, deliver or mail to the Fund all forms of proxies and all notices
of meetings and any other notices, announcements or information (including,
without limitation, information relating to pendency of calls and maturities of
securities and expirations of rights in connection therewith, notices of
exercise of call and put options written by the Fund, and notices of the
maturity of futures contracts (and options thereon) purchased or sold by the
Fund) affecting or relating to securities owned by the Fund that are received by
the Custodian. Upon receipt of Proper Instructions, the Custodian shall execute
and deliver or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its nominees shall
vote upon any of such securities or execute any proxy to vote thereon or give
any consent or take any other action with respect to securities or other assets
of the Fund (except as otherwise herein provided) unless ordered to do so by
Proper Instructions.
The Custodian shall notify the Fund on or before ex-date (or
if later within 24 hours after receipt by the Custodian of the notice of such
corporate action) of all corporate actions affecting portfolio securities of the
Fund received by the Custodian from the issuers of the securities involved, from
third parties proposing a corporate action, from subcustodians, or from commonly
utilized sources (including proprietary sources) providing corporate action
10
information, a list of which will be provided by the Custodian to the Fund from
time to time upon request. Information as to corporate actions shall include
information as to dividends, distributions, stock splits, stock dividends,
rights offerings, conversions, exchanges, tender offers, recapitalizations,
mergers, redemptions, calls, maturity dates and similar transactions, including
ex-, record and pay dates and the amounts or other terms thereof. If the Fund
desires to take action with respect to any corporate action, the Fund shall
notify the Custodian within such period as will give the Custodian (including
any Subcustodian) a sufficient amount of time to take such action.
2.20. Bills. Upon receipt of Proper Instructions, the
Custodian shall pay or cause to be paid, insofar as funds are available for the
purpose, bills, statements, or other obligations of the Fund (including but not
limited to interest charges, taxes, advisory fees, compensation to Fund officers
and employees, and other operating expenses of the Fund).
2.21. Nondiscretionary Details. Without the necessity of
express authorization from the Fund, the Custodian shall (a) attend to all
nondiscretionary details in connection with the sale, exchange, substitution,
purchase, transfer or other dealings with securities, cash or other assets of
the Fund held by the Custodian except as otherwise directed from time to time by
the Board of Trustees of the Fund, and (b) make payments to itself or others for
minor expenses of handling securities or other assets and for other similar
items relating to the Custodian's duties under this Agreement, provided that all
such payments shall be accounted for to the Fund.
2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain securities owned by the Fund in (a) The
Depository Trust Company, (b) the Participants Trust Company, (c) any book-entry
system as provided in Subpart O of Treasury Circular ▇▇. ▇▇▇, ▇▇ ▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇ ▇ of 31 CFR Part 350, or the book-entry regulations of federal agencies
substantially in the form of Subpart O, or (d) any other domestic clearing
agency registered with the Securities and Exchange Commission (the "SEC") under
Section 17A of the Securities Exchange Act of 1934, as amended, which acts as a
securities depository and whose use the Fund has previously approved by Special
Instructions (as that term is defined in section 3.1(b)) (each of the foregoing
being referred to in this Agreement as a "Securities System"). Utilization of a
Securities System shall be in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following provisions:
(i) The Custodian may deposit and/or maintain securities held
hereunder in a Securities System, provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which shall not include any assets of the Custodian
11
other than assets held as a fiduciary, custodian, or otherwise for
customers;
(ii) The records of the Custodian with respect to securities
of the Fund which are maintained in a securities System shall identify
by book entry those securities belonging to the Fund;
(iii) The Custodian shall pay for securities purchased for the
account of the Fund only upon (A) receipt of advice from the Securities
System that such securities have been transferred to the Account, and
(B) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The Custodian
shall transfer securities sold for the account of the Fund only upon
(1) receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (2) 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 advices from the
Securities System of transfers of securities for the account of the
Fund shall identify the Fund, 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 of daily transaction sheets reflecting each
day's transactions in the Securities System for the account of the Fund
on the next business day;
(iv) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Securities System; and the Custodian shall send to the
Fund such reports on its own systems of internal accounting control as
the Fund may reasonably request from time to time; and
(v) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any such Securities System on behalf of the Fund
as promptly as practicable and shall take all actions reasonably
practicable to safeguard the securities of the Fund that had been
maintained with such Securities System.
2.23. Other Transfers. The Custodian shall deliver securities,
cash, and other assets of the Fund to a Subcustodian as necessary to effect
transactions authorized by Proper Instructions. Upon receipt of Proper
Instructions in writing in advance, the Custodian shall make such other
disposition of securities, cash or other assets of the Fund in a manner other
than or for purposes other than as enumerated in this Agreement, provided that
such written Proper Instructions relating to such disposition shall include a
statement of the purpose for which the delivery is to be made, the amount of
funds and/or securities to be delivered and the name of the person or persons to
12
whom delivery is to be made.
2.24. Establishment of Segregated Accounts. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its books a
segregated account or accounts for and on behalf of the Fund, into which account
or accounts may be transferred cash and/or securities or other assets of the
Fund, including securities maintained by the Custodian in a Securities System,
said account to be maintained (a) for the purposes set forth in sections 2.10,
2.11, 2.12 and 2.15; (b) for the purposes of compliance by the Fund with the
procedures required by Release No. 10666 under the Investment Company Act of
1940, as amended (the "1940 Act"), or any subsequent release or releases of the
SEC relating to the maintenance of segregated accounts by registered investment
companies; or (c) for such other purposes as set forth, from time to time, in
Special Instructions.
2.25. Custodian Advances. (a) In the event that the Custodian
is directed by Proper Instructions to make any payment or transfer of funds on
behalf of the Fund for which there would be, at the close of business on the
date of such payment or transfer, insufficient funds held by the Custodian on
behalf of the Fund, the Custodian may, in its discretion without further Proper
Instructions, provide an advance ("Advance") to the Fund in an amount sufficient
to allow the completion of the transaction by reason of which such payment or
transfer of funds is to be made. In addition, in the event the Custodian is
directed by Proper Instructions to make any payment or transfer of funds on
behalf of the Fund as to which it is subsequently determined that the Fund has
overdrawn its cash account with the Custodian as of the close of business on the
date of such payment or transfer, said overdraft shall constitute an Advance.
Any Advance shall be payable on demand by the Custodian, unless otherwise agreed
by the Fund and the Custodian, and shall accrue interest from the date of the
Advance to the date of payment by the Fund at a rate agreed upon in writing from
time to time by the Custodian and the Fund. It is understood that any
transaction in respect of which the Custodian shall have made an Advance,
including but not limited to a foreign exchange contract or other transaction in
respect of which the Custodian is not acting as a principal, is for the account
of and at the risk of the Fund, and not, by reason of such Advance, deemed to be
a transaction undertaken by the Custodian for its own account and risk. The
Custodian and the Fund acknowledge that the purpose of Advances is to finance
temporarily the purchase or sale of securities for prompt delivery or to meet
redemptions or emergency expenses or cash needs that are not reasonably
foreseeable by the Fund. The Custodian shall promptly notify the Fund in writing
(an "Notice of Advance") of any Advance by facsimile transmission or in such
other manner as the Fund and the Custodian may agree in writing. At the request
of the Custodian, the Fund shall pledge, assign and grant to the Custodian a
security interest in certain specified securities of the Fund, as security for
Advances provided to the Fund, under the terms and conditions set forth in
Appendix A attached hereto.
13
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
3.1. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used in this Agreement, the term
"Proper Instructions" shall mean: (i) a tested telex from the Fund or the Fund's
investment manager or adviser, or a written request, direction, instruction or
certification (which may be given by facsimile transmission) signed or initialed
on behalf of the Fund by, one or more Authorized Persons (as that term is
defined in section 3.2); (ii) a telephonic or other oral communication by one or
more Authorized Persons; or (iii) a communication (other than facsimile
transmission) effected directly between electro-mechanical or electronic devices
or systems (including, without limitation, computers) by the Fund or the Fund's
investment manager or adviser or by one or more Authorized Persons on behalf of
the Fund; provided that communications of the types described in clauses (ii)
and (iii) above purporting to be given by an Authorized Person shall be
considered Proper Instructions only if the Custodian reasonably believes such
communications to have been given by an Authorized Person with respect to the
transaction involved. Instructions given in the form of Proper Instructions
under clause (i) shall be deemed to be Proper Instructions if they are
reasonably believed by the Custodian to be genuine. Proper Instructions in the
form of oral communications shall be confirmed by the Fund in the manner set
forth in clauses (i) or (iii) above, but the lack of such confirmation shall in
no way affect any action taken by the Custodian in reliance upon such oral
instructions prior to the Custodian's receipt of such confirmation. The Fund,
the Custodian and any investment manager or adviser of the Fund each is hereby
authorized to record any telephonic or other oral communications between the
Custodian and any such person. Proper Instructions may relate to specific
transactions or to types or classes of transactions, provided that Proper
Instructions may take the form of standing instructions only if they are in
writing.
(b) Special Instructions. As used in this Agreement, the term
"Special Instructions" shall mean Proper Instructions countersigned or confirmed
in writing by the Treasurer or any Assistant Treasurer of the Fund or any other
person designated by the Treasurer of the Fund in writing, which
countersignature or confirmation shall be (i) included on the instrument
containing the Proper Instructions or on a separate instrument relating thereto,
and (ii) delivered by hand, facsimile transmission, mail or courier service or
in such other manner as the Fund and the Custodian agree in writing.
(c) Address for Proper Instructions and Special Instructions.
Proper Instructions and Special Instructions shall be delivered to the Custodian
at the address and/or telephone, telecopy or telex number agreed upon from time
14
to time by the Custodian and the Fund.
3.2. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the Fund shall
deliver to the Custodian a certificate, duly certified by the Treasurer or
Assistant Treasurer of the Fund, setting forth: (a) the names, titles,
signatures and scope of authority of all persons authorized to give Proper
Instructions or any other notice, request, direction, instruction, certificate
or instrument on behalf of the Fund (each an "Authorized Person"); and (b) the
names, titles and signatures of those persons authorized to issue Special
Instructions. Such certificate may be accepted and relied upon by the Custodian
as conclusive evidence of the facts set forth therein and shall be considered to
be in full force and effect until delivery to the Custodian of a similar
certificate to the contrary. Upon delivery of a certificate which deletes the
name(s) of a person previously auhorized to give Proper Instructions or to issue
Special Instructions, such persons shall no longer be considered an Authorized
Person or authorized to issue Special Instructions.
3.3. Persons Having Access to Assets of the Fund.
Notwithstanding anything to the contrary in this Agreement, the Custodian shall
not deliver any assets of the Fund held by the Custodian to or for the account
of any Authorized Person, Trustee, officer, employee or agent of the Fund,
provided that nothing in this section 3.3 shall prohibit (a) any Authorized
Person from giving Proper Instructions, or any person authorized to issue
Special Instructions from issuing Special Instructions, provided such action
does not result in delivery of or access to assets of the Fund prohibited by
this section 3.3; or (b) the Fund's independent certified public accountants
from examining or reviewing the assets of the Fund held by the Custodian. The
Fund shall provide a list of such persons to the Custodian, and the Custodian
shall be entitled to rely upon such list and any modifications thereto that are
provided to the Custodian from time to time by the Fund.
3.4. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts in
accordance with Proper Instructions or Special Instructions, as the case may be,
and the terms of this Agreement, the Custodian shall not be responsible for the
title, validity or genuineness of any property, or evidence of title thereof,
received or delivered by it pursuant to this Agreement.
ARTICLE IV
15
SUBCUSTODIANS
The Custodian may, from time to time, in accordance with the
relevant provisions of this Article IV, appoint one or more Domestic
Subcustodians, Foreign Subcustodians and Interim Subcustodians (as such terms
are defined below) to act on behalf of the Fund. For purposes of this Agreement,
all duly appointed Domestic Subcustodians, Foreign Subcustodians and Interim
Subcustodians are referred to collectively as "Subcustodians."
4.1. Domestic Subcustodians. The Custodian may, at any time
and from time to time, at its own expense, appoint any bank as defined in
section 2(a)(5) of the 1940 Act meeting the requirements of a custodian under
section 17(f) of the 1940 Act and the rules and regulations thereunder, to act
on behalf of the Fund as a subcustodian for purposes of holding cash, securities
and other assets of the Fund and performing other functions of the Custodian
within the United States (a "Domestic Subcustodian"), provided that the
Custodian shall notify the Fund in writing of the identity and qualifications of
any proposed Domestic Subcustodian at least 30 days prior to appointment of such
Domestic Subcustodian, and the Fund may, in its sole discretion, by written
notice to the Custodian executed by an Authorized Person disapprove of the
appointment of such Domestic Subcustodian. If following notice by the Custodian
to the Fund regarding appointment of a Domestic Subcustodian and the expiration
of 30 days after the date of such notice, the Fund shall have failed to notify
the Custodian of its disapproval thereof, the Custodian may, in its discretion,
appoint such proposed Domestic Subcustodian as its subcustodian.
4.2. Foreign Subcustodians and Interim Subcustodians.
(a) Foreign Subcustodians. The Custodian may, at any time and
from time to time, at its own expense, appoint: (i) any bank, trust company or
other entity meeting the requirements of an "eligible foreign custodian" under
section 17(f) of the 1940 Act and the rules and regulations thereunder or
exempted therefrom by order of the SEC, or (ii) any bank as defined in section
2(a)(5) of the 1940 Act meeting the requirements of a custodian under section
17(f) of the 1940 Act and the rules and regulations thereunder to act on behalf
of the Fund as a subcustodian for purposes of holding cash, securities and other
assets of the Fund and performing other functions of the Custodian in countries
other than the United States of America (a "Foreign Subcustodian"); provided
that prior to the appointment of any Foreign Subcustodian, the Custodian shall
have obtained written confirmation of the approval of the Board of Trustees of
the Fund (which approval may be withheld in the sole discretion of such Board)
with respect to (A) the identity and qualifications of any proposed Foreign
Subcustodian, (B) the country or countries in which, and the securities
depositories or clearing agencies (meeting the requirements of an "eligible
foreign custodian" under section 17(f) of the 1940 Act and the rules and
regulations thereunder or exempted therefrom by order of the SEC) through which,
any proposed Foreign Subcustodian is authorized to hold Securities, cash and
16
other assets of the Fund (each a "Foreign Depository") and (C) the form and
terms of the subcustodian agreement to be entered into between such proposed
Foreign Subcustodian and the Custodian. In addition, the Custodian may utilize
directly any Foreign Depository, provided the Board of Trustees shall have
approved in writing the use of such Foreign Depository by the Custodian. Each
such duly approved Foreign Subcustodian and the countries where and the Foreign
Depositories through which it may hold securities and other assets of the Fund
and the Foreign Depositories that the Custodian may utilize shall be listed in
Appendix B, as it may be amended from time to time in accordance with the
provisions of section 9.3. The Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment which is to be held
in a country in which no Foreign Subcustodian is authorized to act, in order
that there shall be sufficient time for the Custodian to effect the appropriate
arrangements with a proposed Foreign Subcustodian, including obtaining approval
as provided in this section 4.2(a). The Custodian shall not agree to any
material amendment to any subcustodian agreement entered into with a Foreign
Subcustodian, or agree to permit any material changes thereunder, or waive any
material rights under such agreement, except upon prior approval pursuant to
Special Instructions. The Custodian shall promptly provide the Fund with notice
of any such amendment, change, or waiver, whether or not material, including a
copy of any such amendment. For purposes of this subsection, a material
amendment, change or waiver means an amendment, change or waiver that may
reasonably be expected to have an adverse effect on the Fund in any material
way, including but not limited to the Fund's or the Board's obligations under
the 1940 Act, including Rule 17f-5 thereunder.
(b) Interim Subcustodians. In the event that the Fund shall
invest in a security or other asset to be held in a country in which no Foreign
Subcustodian is authorized to act (whether because the Custodian has not
appointed a Foreign Subcustodian in such country and entered into a subcustodian
agreement with it or because the Board of Trustees of the Fund has not approved
the Foreign Subcustodian appointed by the Custodian in such country and the
related subcustodian agreement), the Custodian shall promptly notify the Fund in
writing by facsimile transmission or in such other manner as the Fund and
Custodian shall agree in writing that no Foreign Subcustodian is approved in
such country and the Custodian shall, upon receipt of Special Instructions,
appoint any person designated by the Fund in such Special Instructions to hold
such security or other asset. Any person appointed as a Subcustodian pursuant to
this section 4.2(b) is hereinafter referred to herein as an "Interim
Subcustodian." Each Interim Custodian and the securities or assets of the Fund
that it is authorized to hold shall be set forth in Appendix B.
In the absence of such Special Instructions, such security or
other asset shall be held by such agent as the Custodian may appoint unless and
until the Fund shall instruct the Custodian to move the security or other asset
17
into the possession of the Custodian or a Subcustodian.
4.3. Termination of a Subcustodian. The Custodian shall (a)
cause each Domestic Subcustodian and Foreign Subcustodian to, and (b) use its
best efforts to cause each Interim Subcustodian to, perform all of its
obligations in accordance with the terms and conditions of the subcustodian
agreement between the Custodian and such Subcustodian. In the event that the
Custodian is unable to cause such Subcustodian to fully perform its obligations
thereunder, the Custodian shall forthwith, upon the receipt of Special
Instructions, exercise its best efforts to recover any Losses (as hereinafter
defined) incurred by the Fund because of such failure to perform from such
Subcustodian under the applicable subcustodian agreement and, if necessary or
desirable, terminate such subcustodian and appoint a replacement Subcustodian in
accordance with the provisions of this Agreement. In addition to the foregoing,
the Custodian (i) may, at any time in its discretion, upon written notification
to the Fund, terminate any Domestic Subcustodian, Foreign Subcustodian or
Interim Subcustodian, and (ii) shall, upon receipt of Special Instructions,
terminate any Subcustodian with respect to the Fund, in each case in accordance
with the termination provisions of the applicable subcustodian agreement.
4.4. Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank, trust company,
securities depository or clearing agency that is itself qualified to act as a
custodian under the 1940 Act and the rules and regulations thereunder, as its
agent (an "Agent") to carry out such of the provisions of this Agreement as the
Custodian may from time to time direct, provided that the appointment of one or
more Agents (other than an agent appointed to the second paragraph of section
4.2(b)) shall not relieve the Custodian of its responsibilities under this
Agreement. Without limiting the foregoing, the Custodian shall be responsible
for any notices, documents or other information, or any securities, cash or
other assets of the Fund, received by any Agent on behalf of the Custodian or
the Fund as if the Custodian had received such items itself.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
5.1. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise
reasonable care and diligence in carrying out all of its duties and obligations
under this Agreement, and shall be liable to the Fund for all Losses suffered or
incurred by the Fund resulting from the failure of the Custodian to exercise
such reasonable care and diligence. For purposes of this Agreement, "Losses"
means any losses, damages, and expenses.
18
(b) Actions Prohibited by Applicable Law, Etc. In no event
shall the Custodian incur liability hereunder if the Custodian or any
Subcustodian or Securities System, or any subcustodian, securities depository or
securities system utilized by any such Subcustodian or the Custodian, or any
nominee of the Custodian or any Subcustodian, is prevented, forbidden or delayed
from performing, or omits to perform, any act or thing which this Agreement
provides shall be performed or omitted to be performed, by reason of: (i) any
provision of any present or future law or regulation or order of the United
States of America, or any state thereof, or of any foreign country, or political
subdivision thereof or of any court of competent jurisdiction; or (ii) any act
of God or war or action of any de facto or de jure government or other similar
circumstance beyond the control of the Custodian, unless, in each case, such
delay or nonperformance is caused by the negligence, misfeasance or misconduct
of such person.
(c) Mitigation by Custodian. Upon the occurrence of any event
which causes or may cause any Losses to the Fund (i) the Custodian shall, and
shall cause any applicable Domestic Subcustodian or Foreign Subcustodian to, and
(ii) the Custodian shall use its best efforts to cause any applicable Interim
Subcustodian to, use all commercially reasonable efforts and take all reasonable
steps under the circumstances to mitigate the effects of such event and to avoid
continuing harm to the Fund.
(d) Advice of Counsel. The Custodian shall be entitled to
receive and act upon advice of counsel on all matters. The Custodian shall be
without liability for any action reasonably taken or omitted in good faith
pursuant to the advice of (i) counsel for the Fund, or (ii) at the expense of
the Custodian, such other counsel as the Fund may agree to, such agreement not
to be unreasonably withheld or delayed; provided that with respect to the
performance of any action or omission of any action upon such advice, the
Custodian shall be required to conform to the standard of care set forth in
section 5.1(a).
(e) Expenses. In addition to the liability of the Custodian
under this Article V, the Custodian shall be liable to the Fund for all
reasonable costs and expenses incurred by the Fund in connection with any claim
by the Fund against the Custodian arising from the obligations of the Custodian
hereunder including, without limitation, all reasonable attorneys' fees and
expenses incurred by the Fund in asserting any such claim, and all reasonable
expenses incurred by the Fund in connection with any investigations, lawsuits or
proceedings relating to such claim, provided that the Fund has recovered from
the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no
liability in respect of any Losses suffered by the Fund, insofar as such Losses
arise from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Fund by entities
19
other than the Custodian prior to the Custodian's employment hereunder.
(g) Reliance on Certifications. The Secretary or an Assistant
Secretary of the Fund shall certify to the Custodian the names and signatures of
the officers of the Fund, the name and address of the Shareholder Servicing
Agent, and any instructions or directions to the Custodian by the Fund's Board
of Trustees or shareholders. Any such certificate may be accepted and relied
upon by the Custodian as conclusive evidence of the facts set forth therein and
may be considered in full force and effect until receipt of a similar
certificate to the contrary.
5.2. Liability of Custodian for Actions of Other Persons.
(a) Domestic Subcustodians, Foreign Subcustodians and Agents.
The Custodian shall be liable for the actions or omissions of any Domestic
Subcustodian, Foreign Subcustodian or Agent (other than an agent appointed
pursuant to section 4.2(b)) to the same extent as if such action or omission
were performed by the Custodian itself pursuant to this Agreement. In the event
of any Losses suffered or incurred by the Fund caused by or resulting from the
actions or omissions of any Domestic Subcustodian, Foreign Subcustodian or Agent
(other than an agent appointed pursuant to section 4.2(b)) for which the
Custodian would be directly liable if such actions or omissions were those of
the Custodian, the Custodian shall promptly reimburse the Fund in the amount of
any such Losses.
(b) Interim Subcustodians. Notwithstanding the provisions of
section 5.1 to the contrary, the Custodian shall not be liable to the Fund for
any Losses suffered or incurred by the Fund resulting from the actions or
omissions of an Interim Subcustodian or an agent appointed pursuant to section
4.2(b) unless such Losses are caused by, or result from, the negligence,
misfeasance or misconduct of the Custodian; provided that in the event of any
Losses (whether or not caused by or resulting from the negligence, misfeasance
or misconduct of the Custodian), the Custodian shall take all reasonable steps
to enforce such rights as it may have against such Interim Subcustodian or agent
to protect the interests of the Fund.
(c) Securities Systems and Foreign Depositories.
Notwithstanding the provisions of section 5.1 to the contrary, the Custodian
shall not be liable to the Fund for any Losses suffered or incurred by the Fund
resulting from the use by the Custodian or any Subcustodian of a Securities
System or Foreign Depository, unless such Losses are caused by, or result from,
the negligence, misfeasance or misconduct of the Custodian; provided that in the
event of any such Losses, the Custodian shall take all reasonable steps to
enforce such rights as it may have against the Securities System or Foreign
Depository, as the case may be, to protect the interests of the Fund.
(d) Reimbursement of Expenses. The Fund agrees to reimburse
the Custodian for all reasonable out-of-pocket expenses incurred by the
20
Custodian in connection with the fulfillment of its obligations under this
section 5.2, provided that such reimbursement shall not apply to expenses
occasioned by or resulting from the negligence, misfeasance or misconduct of the
Custodian.
5.3. Indemnification.
(a) Indemnification Obligations. Subject to the limitations
set forth in this Agreement, the Fund agrees to indemnify and hold harmless the
Custodian and its nominees for all Losses suffered or incurred by the Custodian
or its nominee (including Losses suffered under the Custodian's indemnity
obligations to Subcustodians) caused by or arising from actions taken by the
Custodian in the performance of its duties and obligations under this Agreement,
provided that such indemnity shall not apply to Losses occasioned by or
resulting from the negligence, misfeasance or misconduct of the Custodian or any
Subcustodian, Securities System, Foreign Depository or their respective
nominees. In addition, the Fund agrees to indemnify the Custodian against any
liability incurred by reason of taxes assessed to the Custodian, any
Subcustodian, any Securities System, any Foreign Depository, and their
respective nominees, or other Losses incurred by such persons, resulting from
the fact that securities and other property of the Fund are registered in the
name of such persons, provided that in no event shall such indemnification be
applicable to income, franchise or similar taxes which may be imposed or
assessed against such persons.
(b) Notice of Litigation, Right to Prosecute, etc. The Fund
shall not be liable for indemnification under this section 5.3 unless the person
seeking indemnification shall have notified the Fund in writing (i) within such
time after the assertion of any claim as is sufficient for such person to
determine that it will seek indemnification from the Fund in respect of such
claim or (ii) promptly after the commencement of any litigation or proceeding
brought against such person, in respect of which indemnity may be sought;
provided that in the case of clause (i) of this section 5.3(b) the Fund shall
not be liable for such indemnification to the extent the Fund is disadvantaged
by any such delay in notification. With respect to claims in such litigation or
proceedings for which indemnity by the Fund may be sought and subject to
applicable law and the ruling of any court of competent jurisdiction, the Fund
shall be entitled to participate in any such litigation or proceeding and, after
written notice from the Fund to the person seeking indemnification, the Fund may
assume the defense of such litigation or proceeding with counsel of its choice
at its own expense in respect of that portion of the litigation for which the
Fund may be subject to an indemnification obligation, provided that such person
shall be entitled to participate in (but not control) at its own cost and
expense, the defense of any such litigation or proceeding if the Fund has not
acknowledged in writing its obligation to indemnify such person with respect to
such litigation or proceeding. If the Fund is not permitted to participate in or
control such litigation or proceeding under applicable law or by a ruling of a
court of competent jurisdiction, such person shall reasonably prosecute such
21
litigation or proceeding. A person seeking indemnification hereunder shall not
consent to the entry of any judgment or enter into any settlement of any such
litigation or proceeding without providing the Fund with adequate notice of any
such settlement or judgment and without the Fund's prior written consent, which
consent shall not be unreasonably withheld or delayed. All persons seeking
indemnification hereunder shall submit written evidence to the Fund with respect
to any cost or expense for which they are seeking indemnification in such form
and detail as the Fund may reasonably request.
5.4. Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its
duties generally, and more particularly in connection with the purchase, sale or
exchange of securities made by or for the Fund, the Custodian shall not be
liable to the Fund, and the Fund agrees to indemnify the Custodian and its
nominees, for any Losses suffered or incurred by the Custodian and its nominees
arising out of any violation of any investment or other limitation to which the
Fund is subject.
5.5. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, the Fund shall have, at its election upon reasonable
notice to the Custodian, the right to enforce, to the extent permitted by any
applicable agreement and applicable law, the Custodian's rights against any
Subcustodian, Securities System, Foreign Depository or other person for Losses
caused the Fund by such Subcustodian, Securities System, Foreign Depository or
other person, and shall be entitled to enforce the rights of the Custodian with
respect to any claim against such Subcustodian, Securities System, Foreign
Depository or other person which the Custodian may have as a consequence of any
such Losses, if and to the extent that the Fund has not been made whole for such
Losses. If the Custodian makes the Fund whole for such Losses, the Custodian
shall retain the ability to enforce its rights directly against such
Subcustodian, Securities System, Foreign Depository or other person. Upon the
Fund's election to enforce any rights of the Custodian under this section 5.5,
the Fund shall reasonably prosecute all actions and proceedings directly
relating to the rights of the Custodian in respect of the Losses incurred by the
Fund; provided that, so long as the Fund has acknowledged in writing its
obligation to indemnify the Custodian under section 5.3 hereof with respect to
such claim, the Fund shall retain the right to settle, compromise and/or
terminate any action or proceeding in respect of the Losses incurred by the Fund
without the Custodian's consent; and provided further that if the Fund has not
made an acknowledgement of its obligation to indemnify the Custodian, the Fund
shall not settle, compromise or terminate any such action or proceeding without
the written consent of the Custodian, which consent shall not be unreasonably
withheld or delayed. The Custodian agrees to cooperate with the Fund and take
all actions reasonably requested by the Fund in connection with the Fund's
enforcement of any rights of the Custodian. The Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the Custodian in
22
connection with the fulfillment of its obligations under this section 5.5,
provided that such reimbursement shall not apply to expenses occasioned by or
resulting from the negligence, misfeasance or misconduct of the Custodian.
ARTICLE VI
RECORDS
6.1. Preparation of Reports. The Custodian shall, as
reasonably requested by the Fund, assist generally in the preparation of reports
to Fund shareholders, regulatory authorities and others, audits of accounts, and
other ministerial matters of like nature. The Custodian shall render statements,
including interim monthly and complete quarterly financial statements, or copies
thereof, from time to time as reasonably requested by Proper Instructions.
6.2. Custodian's Books and Records. The Custodian shall
maintain complete and accurate records with respect to securities and other
assets held for the account of the Fund as required by the rules and regulations
of the SEC applicable to investment companies registered under the 1940 Act,
including: (a) journals or other records of original entry containing a detailed
and itemized daily record of all receipts and deliveries of securities
(including certificate and transaction identification numbers, if any), and all
receipts and disbursements of cash; (b) ledgers or other records reflecting (i)
securities in physical possession, (ii) securities in transfer, (iii) securities
borrowed, loaned or collateralizing obligations of the Fund, (iv) monies
borrowed and monies loaned (together with a record of the collateral therefor
and substitutions of collateral), and (v) dividends and interest received; and
(c) cancelled checks and bank records related thereto. The Custodian shall keep
such other books and records of the Fund as the Fund shall reasonably request.
All such books and records maintained by the Custodian shall be maintained in a
form acceptable to the Fund and in compliance with the rules and regulations of
the SEC (including, but not limited to, books and records required to be
maintained under Section 31(a) of the 1940 Act and the rules and regulations
from time to time adopted thereunder), and any other applicable Federal, State
and foreign tax laws and administrative regulations. All such records will be
the property of the Fund and in the event of termination of this Agreement shall
be delivered to the successor custodian.
All books and records maintained by the Custodian pursuant to
this Agreement and any insurance policies and fidelity or similar bonds
maintained by the Custodian shall be made available for inspection and audit at
reasonable times by officers of, attorneys for, and auditors employed by, the
Fund and the Custodian shall promptly provide the Fund with copies of all
reports of its independent auditors regarding the Custodian's controls and
procedures.
23
6.3. Opinion of Fund's Independent Certified Public
Accountants. The Custodian shall take all reasonable action as the Fund may
request to obtain from year to year favorable opinions from the Fund's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of any periodic reports
to or filings with the SEC and with respect to any other requirements of the
SEC.
6.4. Reports of Custodian's Independent Certified Public
Accountants. At the request of the Fund, the Custodian shall deliver to the Fund
a written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, securities and
other assets, including cash, securities and other assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
the Fund and as may reasonably be obtained by the Custodian.
6.5. Calculation of Net Asset Value. The Custodian shall
compute and determine the net asset value per share of capital stock of the Fund
as of the close of regular business on the New York Stock Exchange on each day
on which such Exchange is open, unless otherwise directed by Proper
Instructions. Such computation and determination shall be made in accordance
with (a) the provisions of the By-Laws of the Fund and [Articles of
Incorporation/ Declaration of Trust], as they may from time to time be amended
and delivered to the Custodian, (b) the votes of the Board of Trustees of the
Fund at the time in force and applicable, as they may from time to time be
delivered to the Custodian, and (c) Proper Instructions. On each day that the
Custodian shall compute the net asset value per share of the Fund, the Custodian
shall provide the Fund with written reports which permit the Fund to verify that
portfolio transactions have been recorded in accordance with the Fund's
instructions.
In computing the net asset value, the Custodian may rely upon
any information furnished by Proper Instructions, including without limitation
any information (i) as to accrual of liabilities of the Fund and as to
liabilities of the Fund not appearing on the books of account kept by the
Custodian, (ii) as to the existence, status and proper treatment of reserves, if
any, authorized by the Fund, (iii) as to the sources of quotations to be used in
computing the net asset value, including those listed in Appendix C hereto, (iv)
as to the fair value to be assigned to any securities or other assets for which
price quotations are not readily available, and (v) as to the sources of
information with respect to "corporate actions" affecting portfolio securities
of the Fund, including those listed in Appendix C. (Information as to "corporate
actions" shall include information as to dividends, distributions, stock splits,
stock dividends, rights offerings, conversions, exchanges, recapitalizations,
24
mergers, redemptions, calls, maturity dates and similar transactions, including
the ex- and record dates and the amounts or other terms thereof.)
In like manner, the Custodian shall compute and determine the
net asset value as of such other times as the Board of Trustees of the Fund, or
any valuation committee thereof, from time to time may reasonably request.
The Custodian shall be held to the standard of care set forth
in Article V with respect to the performance of its responsibilities under this
Article VI. The parties hereto acknowledge, however, that the Custodian's
causing an error or delay in the determination of net asset value may, but does
not in and of itself, constitute negligence, gross negligence or reckless or
willful misconduct. The Custodian's liability for any such negligence, gross
negligence or reckless or willful misconduct which results in an error in
determination of such net asset value shall be limited to the direct,
out-of-pocket loss the Fund, shareholder or former shareholder shall actually
incur, measured by the difference between the actual and the erroneously
computed net asset value, and any expenses incurred by the Fund in connection
with correcting the records of the Fund affected by such error (including
charges made by the Fund's registrar and transfer agent for making such
corrections), communicating with shareholders or former shareholders of the Fund
affected by such error or responding to or defending against any inquiry or
proceeding with respect to such error made or initiated by the SEC or other
regulatory or self-regulatory body.
Without limiting the foregoing, the Custodian shall not be
held accountable or liable to the Fund, any shareholder or former shareholder
thereof or any other person for any delays or Losses any of them may suffer or
incur resulting from (A) the Custodian's failure to receive timely and suitable
notification concerning quotations or corporate actions relating to or affecting
securities of the Fund or (B) any errors in the computation of the net asset
value based upon or arising out of quotations or information as to corporate
actions if received by the Custodian either (1) from a source which the
Custodian was authorized pursuant to the second paragraph of this section 6.5 to
rely upon, or (2) from a source which in the Custodian's reasonable judgment was
as reliable a source for such quotations or information as the sources
authorized pursuant to that paragraph. Nevertheless, the Custodian will use its
best judgment in determining whether to verify through other sources any
information it has received as to quotations or corporate actions if the
Custodian has reason to believe that any such information might be incorrect.
In the event of any error or delay in the determination of
such net asset value for which the Custodian may be liable, the Fund and the
Custodian will consult and make good faith efforts to reach agreement on what
actions should be taken in order to mitigate any Losses suffered by the Fund or
its present or former shareholders, in order that the Custodian's exposure to
25
liability shall be reduced to the extent possible after taking into account all
relevant factors and alternatives. Such actions might include the Fund or the
Custodian taking reasonable steps to collect from any shareholder or former
shareholder who has received any overpayment upon redemption of shares such
overpaid amount or to collect from any shareholder who has underpaid upon a
purchase of shares the amount of such underpayment or to reduce the number of
shares issued to such shareholder. It is understood that in attempting to reach
agreement on the actions to be taken or the amount of the loss which should
appropriately be borne by the Custodian, the Fund and the Custodian will
consider such relevant factors as the amount of the loss involved, the Fund's
desire to avoid loss of shareholder good will, the fact that other persons or
entities could have reasonably expected to have detected the error sooner than
the time it was actually discovered, the appropriateness of limiting or
eliminating the benefit which shareholders or former shareholders might have
obtained by reason of the error, and the possibility that other parties
providing services to the Fund might be induced to absorb a portion of the loss
incurred.
Upon written notice from the Fund to the Custodian, the
Custodian's responsibilities under this Section 6.5 shall terminate, but this
Agreement shall otherwise continue in full force and effect. Upon such
termination, the fee schedule provided for under Article VII hereof shall be
adjusted by the parties in such manner as they may agree, and the Custodian will
transfer such of the Fund's books and records, and provide such other reasonable
cooperation, as the Fund may request in connection with the transfer of such
responsibilities.
6.6. Information Regarding Foreign Subcustodians and Foreign
Depositories. (a) The Custodian shall use reasonable efforts to assist the Fund
in obtaining the following with respect to any country in which any assets of
the Fund are held or proposed to be held:
(1) information concerning whether, and to what extent,
applicable foreign law would restrict the access afforded the Fund's
independent public accountants to books and records kept by a foreign
custodian or foreign securities depository used, or proposed to be
used, in that country;
(2) information concerning whether, and to what extent,
applicable foreign law would restrict the Fund's ability to recover its
assets in the event of the bankruptcy of a foreign custodian or foreign
securities depository used, or proposed to be used, in that country;
(3) information concerning whether, and to what extent,
applicable foreign law would restrict the Fund's ability to recover
assets that are lost while under the control of a foreign custodian or
foreign securities depository used, or proposed to be used, in that
country;
26
(4) information concerning the likelihood of expropriation,
nationalization, freezes or confiscation of the Fund's assets in that
country;
(5) information concerning whether difficulties in converting
the Fund's cash and cash equivalents held in that country into U.S.
Dollars are reasonably foreseeable, including without limitation as a
result of applicable foreign currency exchange regulations;
(6) information concerning the financial strength, general
reputation and standing and ability to perform custodial services of
each foreign custodian or foreign securities depository used, or
proposed to be used, in that country;
(7) information concerning whether each foreign custodian or
foreign securities depository used, or proposed to be used, in that
country would provide a level of safeguards for maintaining the Fund's
assets not materially different from that provided by the Custodian in
maintaining the Fund's securities in the United States;
(8) information concerning whether each foreign custodian or
foreign securities depository used, or proposed to be used, in that
country has offices in the United States in order to facilitate the
assertion of jurisdiction over and enforcement of judgments against
such custodian or depository;
(9) as to each foreign securities depository used, or proposed
to be used, in that country information concerning the number of
participants in, and operating history of, such depository; and
(10) such other information as may be requested by the Fund to
ensure compliance with Rule 17f-5 under the 1940 Act.
(b) During the term of this Agreement, the Custodian shall use
reasonable efforts to provide the Fund with prompt notice of any material
changes in the facts or circumstances upon which any of the foregoing
information or statements were based.
(c) Upon request of the Fund, the Custodian shall deliver to
the Fund a certificate stating: (i) the identity of each Foreign Subcustodian
then acting on behalf of the Custodian; and (ii) the countries in which and the
Foreign Depositories through which each such Foreign Subcustodian or the
Custodian is then holding cash, securities and other assets of the Fund.
ARTICLE VII
CUSTODIAN FEES
27
The Fund shall pay the Custodian a custody fee based on such
fee schedule as may from time to time be agreed upon in writing by the Custodian
and the Fund. Such fee, together with all amounts for which the Custodian is to
be reimbursed in accordance with the following sentence, shall be billed to the
Fund in such a manner as to permit payment either by a direct cash payment to
the Custodian or by placing Fund portfolio transactions with the Custodian
resulting in an agreed-upon amount of commissions being paid to the Custodian
within an agreed-upon period of time. The Custodian shall be entitled to receive
reimbursement from the Fund on demand for its cash disbursements and expenses
(including cash disbursements and expenses of any Subcustodian or Agent for
which the Custodian has reimbursed such Subcustodian or Agent) permitted by this
Agreement, but excluding salaries and usual overhead expenses, upon receipt by
the Fund of reasonable evidence thereof.
ARTICLE VIII
TERMINATION
This Agreement shall continue in full force and effect until
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid, to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing. In the event of
termination, the Custodian shall be entitled to receive prior to delivery of the
securities, cash and other assets held by it all accrued fees and unreimbursed
expenses the payment of which is contemplated by Article VII, upon receipt by
the Fund of a statement setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it
is agreed that the cash, securities and other assets owned by the Fund and held
by the Custodian or any Subcustodian or Agent shall be delivered to the
successor custodian, and the Custodian agrees to cooperate with the Fund in
execution of documents and performance of other actions necessary or desirable
in order to substitute the successor custodian for the Custodian under this
Agreement.
ARTICLE IX
MISCELLANEOUS
9.1. Execution of Documents. Upon request, the Fund shall
deliver to the Custodian such proxies, powers of attorney or other instruments
as may be reasonable and necessary or desirable in connection with the
performance by the Custodian or any Subcustodian of their respective obligations
under this Agreement or any applicable subcustodian agreement.
28
9.2. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof.
9.3. Waivers and Amendments. No provision of this Agreement
may be amended or terminated except by a statement in writing signed by the
party against which enforcement of the amendment or termination is sought,
provided that Appendix B listing the Foreign Subcustodians and Foreign
Depositories approved by the Fund may be amended from time to time to add or
delete one or more of such entities [or sources] by delivery to the Custodian of
a revised Appendix B executed by an Authorized Person, such amendment to take
effect immediately upon execution of the revised Appendix B by the Custodian.
In connection with the operation of this Agreement, the
Custodian and the Fund may agree in writing from time to time on such provisions
interpretative of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
9.4. Captions. The section headings in this Agreement are for
the convenience of the parties and in no way alter, amend, limit or restrict the
contractual obligations of the parties set forth in this Agreement.
9.5. Governing Law. This instrument shall be governed by and
construed in accordance with the laws of the State of New York.
9.6. Notices. Notices and other writings delivered or mailed
postage prepaid to the Fund addressed to the Fund at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or to such other address as the Fund may have
designated to the Custodian in writing, or to the Custodian at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Manager, Securities Department, or to
such other address as the Custodian may have designated to the Fund in writing,
shall be deemed to have been properly delivered or given hereunder to the
respective addressee.
9.7. Successors and Assigns. This Agreement shall be binding
on and shall inure to the benefit of the Fund and the Custodian and their
respective successors and assigns, provided that neither party hereto may assign
this Agreement or any of its rights hereunder without the prior written consent
of the other party.
9.8. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original. This
Agreement shall become effective when one or more counterparts have been signed
and delivered by each of the parties.
29
9.9. Representative Capacity; Nonrecourse Obligations. The
Custodian agrees that any claims by it against the Fund under this Agreement may
be satisfied only from the assets of the Fund; that the person executing this
Agreement has executed it on behalf of the Fund and not individually, and that
the obligations of the Fund arising out of this Agreement are not binding upon
such person or the Fund's shareholders individually but are binding only upon
the assets and property of the Fund; and that no shareholders, trustees or
officers of the Fund may be held personally liable or responsible for any
obligations of the Fund arising out of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed in its name and behalf on the day and year first above
written.
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
per pro_________________
Name:
Title:
▇▇▇▇▇▇▇ VARIABLE LIFE INVESTMENT FUND
By:_____________________
Name:
Title:
30
APPENDIX A TO THE
CUSTODIAN AGREEMENT BETWEEN
▇▇▇▇▇▇▇ VARIABLE LIFE INVESTMENT FUND AND
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
DATED AS OF April 29, 1996
PROCEDURES RELATING TO CUSTODIAN'S SECURITY INTEREST
----------------------------------------------------
As security for any Advances (as defined in the Custodian
Agreement) of the Fund, the Fund shall pledge, assign and grant to the Custodian
a security interest in Collateral (as hereinafter defined), under the terms,
circumstances and conditions set forth in this Appendix A.
Section 1. Defined Terms. As used in this Appendix A the following terms
shall have the following respective meanings:
(a) "Business Day" shall mean any day that is not a Saturday, a Sunday
or a day on which the Custodian is closed for business.
(b) "Collateral" shall mean those securities having a fair market value
(as determined in accordance with the procedures set forth in the prospectus for
the Fund) equal to the aggregate of all Advance Obligations of the Fund that are
(i) identified in any Pledge Certificate executed on behalf of the Fund or (ii)
designated by the Custodian for the Fund pursuant to Section 3 of this Appendix
A. Such securities shall consist of marketable securities held by the Custodian
on behalf of the Fund or, if no such marketable securities are held by the
Custodian on behalf of the Fund, such other securities designated by the Fund in
the applicable Pledge Certificate or by the Custodian pursuant to Section 3 of
this Appendix A.
(c) "Advance Obligations" shall mean the amount of any outstanding
Advance(s) provided by the Custodian to the Fund together with all accrued
interest thereon.
(d) "Pledge Certificate" shall mean a Pledge Certificate in the form
attached as Exhibit 1 to this Appendix A, executed by a duly authorized officer
of the Fund and delivered by the Fund to the Custodian by facsimile transmission
or in such other manner as the Fund and the Custodian may agree in writing.
(e) "Release Certificate" shall mean a Release Certificate in the form
attached as Exhibit 2 to this Appendix A, executed by a duly authorized officer
of the Custodian and delivered by the Custodian to the Fund by facsimile
transmission or in such other manner as the Fund and the Custodian may agree in
writing.
31
(f) "Written Notice" shall mean a written notice executed by a duly
authorized officer of the party delivering the notice and delivered by facsimile
transmission or in such other manner as the Fund and the Custodian shall agree
in writing.
Section 2. Pledge of Collateral. To the extent that any Advance
Obligations of the Fund are not satisfied by the close of business on the first
Business Day following the Business Day on which the Fund receives a Written
Notice requesting security for such Advance Obligation and stating the amount of
such Advance Obligation, the Fund shall pledge, assign and grant to the
Custodian a first priority security interest in Collateral specified by the Fund
by delivering to the Custodian a Pledge Certificate executed by the Fund
describing such Collateral. Such Written Notice may, in the discretion of the
Custodian, be included within or accompany the Notice of Advance (as defined in
the Custodian Agreement) relating to the applicable Advance Obligation.
Section 3. Failure to Pledge Collateral. In the event that the Fund
shall fail (a) to pay the Advance Obligation described in such Written Notice,
(b) to deliver to the Custodian a Pledge Certificate pursuant to Section 2, or
(c) to identify substitute securities pursuant to Section 6 upon the sale or
maturity of any securities identified as Collateral, the Custodian may, by
Written Notice to the Fund, specify Collateral which shall secure the applicable
Advance Obligation. The Fund hereby pledges, assigns and grants to the Custodian
a first priority security interest in any and all Collateral specified in such
Written Notice; provided that such pledge, assignment and grant of security
shall be deemed to be effective only upon receipt by the Fund of such Written
Notice, and provided further that if the Custodian specifies Collateral in which
a first priority security interest has already been granted, the security
interest pledged, assigned and granted hereunder shall be a security interest
that is not a first priority security interest.
Section 4. Delivery of Additional Collateral. If at any time the
Custodian shall notify the Fund by Written Notice that the fair market value of
the Collateral securing any Advance Obligation is less than the amount of such
Advance Obligation, the Fund shall deliver to the Custodian, within one Business
Day following the Fund's receipt of such Written Notice, an additional Pledge
Certificate describing additional Collateral. If the Fund shall fail to deliver
such additional Pledge Certificate, the Custodian may specify Collateral which
shall secure the unsecured amount of the applicable Advance Obligation in
accordance with Section 3 of this Appendix A.
Section 5. Release of Collateral. Upon payment by the Fund of any
Advance Obligation secured by the pledge of Collateral, the Custodian shall
promptly deliver to the Fund a Release Certificate pursuant to which the
32
Custodian shall release Collateral from the lien under the applicable Pledge
Certificate or Written Notice pursuant to Section 3 having a fair market value
equal to the amount paid by the Fund on account of such Advance Obligation. In
addition, if at any time the Fund shall notify the Custodian by Written Notice
that the Fund desires that specified Collateral be released and (a) that the
fair market value of the Collateral securing any Advance Obligation exceeds the
amount of such Advance Obligation, or (b) that the Fund has delivered a Pledge
Certificate pursuant to Section 6 substituting Collateral in respect of such
Advance Obligation, the Custodian shall deliver to the Fund, within one Business
Day following the Custodian's receipt of such Written Notice, a Release
Certificate relating to the Collateral specified in such Written Notice.
Section 6. Substitution of Collateral. The Fund may substitute
securities for any securities identified as Collateral by delivery to the
Custodian of a Pledge Certificate executed by the Fund, indicating the
securities pledged as Collateral.
Section 7. Security for Fund Advance Obligations. The pledge of
Collateral by the Fund shall secure only Advance Obligations of the Fund. In no
event shall the pledge of Collateral by the Fund be deemed or considered to be
security for any other types of obligations of the Fund to the Custodian or for
the Advance Obligations or other types of obligations of any other fund.
Section 8. Custodian's Remedies. Upon (a) the Fund's failure to pay any
Advance Obligation of the Fund within thirty days after receipt by the Fund of a
Written Notice demanding security therefor, and (b) one Business Day's prior
Written Notice to the Fund, the Custodian may elect to enforce its security
interest in the Collateral securing such Advance Obligation, by taking title to
(at the then prevailing fair market value), or selling in a commercially
reasonable manner, so much of the Collateral as shall be required to pay such
Advance Obligation in full. Notwithstanding the provisions of any applicable
law, including, without limitation, the Uniform Commercial Code, the remedy set
forth in the preceding sentence shall be the only right or remedy to which the
Custodian is entitled with respect to the pledge and security interest granted
pursuant to any Pledge Certificate or Section 3. Without limiting the foregoing,
the Custodian hereby waives and relinquishes all contractual and common law
rights of set-off to which it may now or hereafter be or become entitled with
respect to any obligations of the Fund to the Custodian arising under this
Appendix A to the Custodian Agreement.
33
IN WITNESS WHEREOF, each of the parties has caused this Appendix A to
be executed in its name and behalf on the day and year first above written.
▇▇▇▇▇ BROTHERS ▇▇▇▇▇▇▇▇ & CO.
By: _____________________
Name: _____________________
Title: _____________________
▇▇▇▇▇▇▇ VARIABLE LIFE INVESTMENT
FUND
By: _____________________
Name: _____________________
Title: _____________________
34
EXHIBIT 1
TO
Appendix A
PLEDGE CERTIFICATE
------------------
This Pledge Certificate is delivered pursuant to the Custodian
Agreement dated as of ______________, 1996 (the "Agreement"), between ▇▇▇▇▇▇▇
Variable Life Investment Fund (the "Fund") and ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.
(the "Custodian"). Capitalized terms used herein without definition shall have
the respective meanings ascribed to them in the Agreement. Pursuant to [Section
2 or Section 4] of Appendix A attached to the Agreement, the Fund hereby
pledges, assigns and grants to the Custodian a first priority security interest
in the securities listed on Schedule A attached to this Pledge Certificate
(collectively, the "Pledged Securities"). Upon delivery of this Pledge
Certificate, the Pledged Securities shall constitute Collateral, and shall
secure all Advance Obligations of the Fund described in that certain Written
Notice dated ___, 19__ , delivered by the Custodian to the Fund. The pledge,
assignment and grant of security in the Pledged Securities hereunder shall be
subject in all respects to the terms and conditions of the Agreement, including,
without limitation, Sections 7 and 8 of Appendix A attached hereto.
IN WITNESS WHEREOF, the Fund has caused this Pledge
Certificate to be executed in its name, on behalf of the Fund this ____ day of
_______, 1996.
By: _____________________
Name: _____________________
Title: _____________________
35
SCHEDULE A
TO
PLEDGE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
------ -------- ------- ------
36
EXHIBIT 2
TO
Appendix A
RELEASE CERTIFICATE
-------------------
This Release Certificate is delivered pursuant to the Custodian
Agreement dated as of _________, 1996 (the "Agreement"), between ▇▇▇▇▇▇▇
Variable Life Investment Fund (the "Fund") and ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.
(the "Custodian"). Capitalized terms used herein without definition shall have
the respective meanings ascribed to them in the Agreement. Pursuant to Section 5
of Appendix A attached to the Agreement, the Custodian hereby releases the
securities listed on Schedule A attached to this Release Certificate from the
lien under the [Pledge Certificate dated __________, 19__ or the Written Notice
delivered pursuant to Section 3 of Appendix A dated ___________, 19__.
IN WITNESS WHEREOF, the Custodian has caused this Release Certificate
to be executed in its name and on its behalf this ____ day of 19__.
▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.
By: _____________________
Name: _____________________
Title: _____________________
37
SCHEDULE A
TO
RELEASE CERTIFICATE
Type of Certificate/CUSIP Number of
Issuer Security Numbers Shares
------ -------- ------- ------
38