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