PLEDGE AGREEMENT
Agreement dated as of August l5, 1997 between Xxxxxxx, Xxxxx & Co.
("Broker"), The Prudential Series Fund, Inc., ("Customer" or the "Fund") "), an
investment company registered under the Investment Company Act of 1940, on
behalf of each of the individual portfolios set forth on Schedule A annexed
hereto, and Investors Fiduciary Trust Company (9FTC') ("Bank') (Customer, Broker
and Bank are hereinafter collectively known as the "Parties").
WHEREAS, by a Customer Agreement (the "Customer Agreement") dated August
I5, 1997, Customer has opened one or more trading accounts (each a "Trading
Account") with Broker, a registered Futures Commission Merchant, for the purpose
of trading financial futures contracts ("Futures Contracts") and options on
Futures Contracts ("Options") (Options and Futures Contracts are referred to
individually as a "Contract" and collectively as "Contracts"; and
WHEREAS, the rules and regulations of the Chicago Mercantile Exchange, the
Chicago Board of Trade, the Commodity Futures Trading Commission and such other
exchanges or boards of trade on which Broker may effect, or cause to be
effected, Contract transactions for Customer (each an "Exchange"; together the
"Exchanges"), may require Customer to deposit with Broker certain collateral;
and
WHEREAS, Prudential Mutual Fund Management, Inc. ("PMF"), an indirect,
wholly-owned subsidiary of The Prudential Insurance Company of America
("Prudential"), the investment manager of the Fund pursuant to the Management
Agreement between the Fund and PMF, has entered into a Sub-Advisory Agreement
with The Prudential Investment Corporation ("PlC"), a wholly-owned subsidiary of
Prudential, pursuant to which PlC furnishes investment advisory services to the
Fund; and
WHEREAS, Bank is a portfolio securities custodian for Customer pursuant to
the Custodian Agreement between Customer and Bank ("Custodian Agreement"); and
WHEREAS, Customer, Broker and Bank have agreed that Bank will open and
maintain such third party custody accounts as Customer may direct (each a
"Pledge Account"), such accounts to be subject to the terms of this Agreement
and the Custody Agreement between Customer and Bank (the "Custody Agreement");
AND
NOW, THEREFORE, it is agreed as follows:
1. As used herein the following terms shall have the following meanings
(such meaning to be equally applicable to both the singular and plural
forms of the terms defined):
"Initial Margin" means the minimum margin required by an Exchange on
which a transaction is effected in order to purchase or sell a Futures
Contract or to sell an Option on such Exchange.
"Instructions from Broker" means a request, direction or certification
in writing signed in the name of Broker by a person authorized to sign
for Broker as certified in writing to Bank by an officer of Broker.
"Instructions from Customer" means a request, direction or
certification in writing signed in the name of Customer by a person
authorized to sign for Customer and hand-delivered to Bank or
transmitted to it by a facsimile sending device except that
instructions to transfer to or from each Pledge account cash or
Government securities, or cash or securities denominated in a currency
other than US dollars will be given by telephone and thereafter
confirmed in writing.
"Notice by Broker to Customer" or "Notice by Bank to Customer" means
notice by Broker or by Bank, respectively, to any person designated by
Customer in writing as eligible to receive such notice. When notice is
given pursuant to paragraphs 10 (B), (C) and (D), telephone notice
must be followed by a hand-delivered notice or facsimile notice.
"Notice by Broker to Bank" means notice by Broker to any person
designated by Bank in writing as eligible to receive such notice, or,
in the event no such person is available, to any officer in the
Custody Administration Department of Bank.
"Business Day" means a day on which and at a time at which Customer,
Bank and Broker are all open for business.
"Variation Margin" means any additional margin required by any
Exchange on which any Contract transaction is effected by Broker for
Customer due to the variation in value of one or more outstanding
Futures Contracts purchased or sold or Options sold for Customer.
2. With respect to Contracts traded on any contract market designated by
the CFTC pursuant to Section 5 of the Commodity Exchange Act, as
amended ("CEA"), Customer hereby requests Bank to open and maintain,
and Bank hereby agrees to open and maintain a Pledge Account for
Broker as pledgee of Customer with respect to each Trading Account
Each such Pledge Account shall be entitled "Xxxxxxx, Sachs & Co.,
Commodity Customer Funds for the benefit of The Prudential Series
Fund, Inc. (Customer Segregated Account)". With respect to Contracts
traded on any foreign board of trade or exchange, Customer hereby
requests Bank to open and maintain, and Bank hereby agrees to open and
maintain, a Pledge Account for Broker
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as pledgee of Customer with respect to each Trading Account Each such
Pledge Account shall be entitled "Xxxxxxx, Xxxxx & Co., Commodity
Customer Funds for the benefit of The Prudential Series Fund, Inc.
(Customer Secured Account)".
Each Pledge Account is a segregated or secured (as applicable) account
within the meaning of the CEA, and regulations promulgated by the CFTC
pursuant thereto and all cash, securities and other property deposited
therein will be held by Bank in accordance therewith. Bank hereby
acknowledges that (1) in the case of any property deposited in the
Customer Segregated Account, such property is that of a commodity or
options customer of Broker and is being held in accordance with the
CEA and the regulations of the CFTC thereunder, and (2) in the case of
any property deposited in the Customer Secured Account, such property
is being held for or on behalf of a foreign futures and foreign
options customer of Broker and is being held in accordance with the
regulations of the CFTC under the CEA.
3. Customer shall give instructions from Customer to bank to hold in the
Pledge Account cash, U.S. Government securities, cash or securities
denominated in a foreign currency or any combination thereof
(collectively, "Collateral"), in the amount of Initial Margin required
with respect to any Contract for the Trading Account. In the case of
Initial Margin in connection with Options written by Customer, such
margin shall be increased or reduced daily in accordance with the
requirements of the Exchange on which the Options were sold. Such
Collateral shall be maintained in the Pledge Account until termination
or satisfaction of the related Futures Contract or Option. Customer
may give Instructions from Customer to Bank to hold Collateral in the
Pledge Account in excess of such requirements (Excess Collateral). In
determining whether Collateral is sufficient to satisfy Initial Margin
requirements of any Exchange, U.S. Government securities will be
valued at 90% of current market value ("Value").
Customer may enter into a transaction in a contract that is
denominated in a currency (the "Contract Currency") other than the
currency of Customer's jurisdiction. At Customers discretion, Customer
may deposit in a Pledge Account Collateral in the form of cash or
securities denominated in a currency other than the Contract Currency
(the "Base "Currency"). In that event, Broker shall determine
Customer's margin requirements in the Base Currency on any day in a
commercially reasonable manner based on current exchange rates between
the Base Currency and the Contract Currency. Furthermore, Customer
shall pay Broker's fee as in effect from the time from Brokers deposit
of margin in the Contract Currency with applicable Exchange.
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In determining whether Collateral is sufficient to satisfy Initial.
Margin requirements of any Exchange, the Value of securities
denominated in a currency other than the currency of Customer's
jurisdiction shall be determined by Broker. In the event that Customer
disagrees with the Value determined by Broker, Customer shall have one
Business Day to submit a different Value. If Broker disagrees with the
Value submitted by Customer, Broker and Customer shall promptly agree
on a third-party pricing source to provide the Value. The Value
determined by the third-party pricing source shall be conclusive.
Notwithstanding the foregoing, if the Value assigned by Broker is the
same as the price assigned thereto by the relevant Exchange, then that
Value shall be conclusive and Customer shall not have the opportunity
to object.
4. Bank at no time shall have any responsibility for determining
eligibility, value or adequacy of Collateral held in the Pledge
Account Collateral held in any Pledge Account:
(i) will be held by Bank as agent of Broker subject to the terms and
conditions of the Custody Agreement, as modified by this
Agreement This Agreement shall be controlling with respect to
each Pledge Account in the event of conflicting provisions;
(ii) may be released, transferred or sold only in accordance with the
terms of this Agreement; and
(iii) except as provided herein, shall not be made available to Broker
or to any person claiming through Broker, including creditors of
Broker.
Customer hereby grants to Broker a continuing security interest in the
Collateral and the proceeds thereof (but not such portion of the
Collateral which constitutes Excess Collateral) subject to the terms
and conditions of this Agreement Such security interest will terminate
at the earlier of (1) release of such Collateral by Broker as provided
herein, or (2) such time as such Collateral becomes Excess Collateral.
The Collateral shall at all times remain the property of Customer
subject only to the interest and rights therein of Broker as secured
party thereof as provided in this Agreement
5. Other than pursuant to paragraph 10, Collateral shall only be
transferred or released from any Pledge Account upon both (x)
Instructions from Broker and (y) Instructions from Customer. Customer
and Bank represent to Broker that Bank is not an affiliate of
Customer.
6. Customer may substitute as Collateral, cash, U.S. Government
securities (or any combination thereof) of equal or greater Value, or,
if applicable, cash or securities (or any combination thereof)
denominated in a foreign currency
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(collectively "Assets"), of equal or greater Value. Upon request from
Customer identifying the Collateral to be substituted, Broker agrees
to promptly give Instructions to Bank to release from the Pledge
Account Assets of an equal Value, or such lesser amount as may be
directed by Customer, upon receipt of substitute Collateral.
7. Broker shall promptly notify Customer of the amount of any Excess
Funds in a Pledge Account. Upon request of Customer, Broker shall
promptly give Instructions to Bank to release Assets, the Value of
which in the aggregate does not exceed the amount of such Excess
Collateral.
8. Interest on U.S. Government securities held in any Pledge Account will
be automatically credited by Bank in immediately available funds to an
account designated in writing by Customer the date that such funds
become due and payable. Amounts due on U.S. Government securities
which mature or are redeemed will be credited to the Pledge Account or
an account designated by Customer in immediately available funds on
the date funds are received by Bank.
9. Bank shall promptly give Notice by Bank to Customer, and Broker of,
and transmit to both, written confirmation of each transfer into or
out of any Pledge Account.
10. Broker shall have access to the Collateral only in accordance with the
following:
(A) If Variation Margin is required, then Broker shall give
Instructions from Broker to Customer and such Variation
Margin shall first be satisfied by reducing the balance, if
any, of the Trading Account with Broker. If the balance of
such Trading Account is insufficient, then Broker shall
include in such Instructions the amount of the Variation
Margin.
Unless a shorter notice period is required by the Exchange
on which the futures positions are carried, or, a longer
notice period is agreed upon by Broker and Customer, (i) if
Notice by Broker to Customer is given that additional margin
is required due to variation in the value of one or more
outstanding Futures Contracts purchased or sold for Customer
or assigned to Customer as a result of exercise of Options
written by Customer ("Variation Margin") prior to 11:30 a.m.
New York time on a day on which Customer is open for
business, which Variation Margin shall first have been
satisfied from any amounts currently credited to Customer's
Trading Account with Broker in connection with which the
Variation
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Margin is required, Customer shall transfer to Broker such
Variation Margin not later than the end of the Business Day
on which such notice was given. Unless a shorter period of
time is required or specified as referenced above. (ii) if
Notice by Broker to Customers is given of the need for
Variation Margin subsequent to 11:30 a.m. but prior to 4:00
p.m. New York time on a Business Day, then, Customer shall
cause such Variation Margin to be transferred to Broker not
later than 11:30 a.m. New York time on the next succeeding
Business Day or if not in US Dollars, then the transfer is
to be completed in accordance with market standards. (Any
Notice by Broker to Customer after 4:00 p.m. New York time
but before the end of a Business Day shall be deemed to have
been given prior to 11:30 a.m. New York time on the next
succeeding Business Day.)
In either case, Broker shall immediately notify Customer in
writing of the receipt of Variation Margin.
(B) If Broker has not received the requested Variation Margin
within the applicable time period as provided in paragraph
(A) above, then Notice by Broker to Customer of such failure
shall be given immediately.
(C) If Broker does not receive the Variation Margin within the
time periods required in paragraph (A) above, then Broker
may give
(i) Notice by Broker to Bank of Customer's failure to
provide Variation Margin and the amount of Variation Margin
required, and
(ii) Notice by Broker to Customer that such Notice has been
given to Bank. Immediately upon receipt of Notice by Broker
to Bank, Bank shall give Notice by Bank to Customer of its
receipt of such Notice by Broker.
(D) If Customer has failed to transfer the required Variation
Margin to Broker during the period specified in paragraph
(A) above, then
(i) Broker may give Instructions from Broker to Bank to (a)
transfer eligible securities from such Pledge Account to
Broker, (b) to sell at the prevailing market price such of
the Collateral in the Pledge Account as necessary to provide
for payment to Broker of the amount of Variation Margin that
Broker shall have
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specified in the Notice and transfer the proceeds of such
sale to Broker, or
(ii) with respect to Collateral in the form of cash, Broker
may give Instructions from Broker to Bank immediately to
transfer cash in the amount of the Variation Margin that
Broker shall have specified in such Notice from such Pledge
Account to the account of Broker.
Bank shall contemporaneously therewith give Notice by Bank
to Customer of its receipt of such Instructions from Broker
to Bank and, upon taking any action pursuant to such
Instructions, shall contemporaneously therewith give Notice
by Bank to Customer of such actions.
(E) Bank shall retain in such Pledge Account any Collateral in
excess of the amount specified in Instructions by Broker to
Bank, including any proceeds from the sale of securities in
excess of such amount. Bank shall give consideration to any
timely requests by Customer with respect to particular
securities to be transferred or sold, and shall sell any
securities in the principal market for such securities, or
in the event such principal market is closed, to sell them
in a commercially reasonable manner.
11. Neither Broker nor any person claiming through Broker shall have
access to Collateral in any Pledge Account established and maintained
by Customer other than the applicable Pledge Account established and
maintained pursuant to this Agreement and only in accordance with the
provisions of this Agreement
12. Any and all expenses of establishing, maintaining, or terminating the
Pledge Account, including without limitation any and all expenses
incurred by Bank in connection with the Pledge Account, shall be borne
by Broker.
13. No amendment of this Agreement shall be effective unless in writing
and signed by a duly authorized officer of each of Broker, Customer
and Bank.
14. All notices, instructions, notification and other communications
hereunder (each a "Notice") shall be, unless otherwise stated herein,
hand-delivered or transmitted by a facsimile sending device (except
that notice of termination shall be sent by certified mail) addressed
as set forth below (or as set forth in a subsequent Notice). Each of
Broker, Customer and Bank may act upon any such Notice reasonably
believed by such party to be authorized to be given in accordance with
this Agreement and to be genuine.
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(a) if to Bank, to:
Investors Fiduciary Trust Company
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx Both
(b) if to Customer, to:
The Prudential Series Fund, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx
AND
The Prudential Series Fund, Inc.
Xxx Xxxxxxx Xxxxxx, 0xx Xxxxx Xxxxxx,
Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxx
AND
The Prudential Series Fund, Inc.
c/o Quantitative Investment Management
00 XXX Xxxxxxx, 0Xx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Compliance Department
(C) if to Broker, to:
Xxxxxxx, Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Futures Services Administrator
15. Except as specifically provided herein, this Agreement does not affect
any other agreement entered into among the parties.
16. Any of the parties may terminate this Agreement upon 30 days' written
Notice to the other parties hereto; provided, however, that Collateral
which has not been released by Broker at or prior to the time of
termination shall be transferred to a substitute custodian designated
by Customer and reasonably acceptable to Broker.
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17. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by the laws of the
State of New York. This Agreement shall be binding on Broker, Bank and
Customer and their respective successors and assigns.
18. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when
so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement If any provision
or condition of this Agreement shall be held to be invalid or
unenforceable by any court, regulatory or self-regulatory agency or
body, such invalidity or unenforceability shall attach only to that
provision or condition, to the extent permitted by applicable law.
19. Bank's duties and responsibilities are as set forth in this Agreement
and no implied duties, covenants or obligations shall be read into
this Agreement against Bank. Bank shall not be liable or responsible
for anything done, or omitted to be done by it in good faith and in
the absence of negligence or willful misconduct
As between Customer and Bank, the terms of the Custody Agreement shall
apply with respect to any Bank losses or liabilities arising out of
matters covered by this Agreement.
As between Bank and Broker, Broker agrees to reimburse and hold Bank
harmless against any claims, costs, damages, taxes, actions, expenses,
(including reasonable counsel fees) or other liabilities whatsoever
which may be imposed upon Bank or incurred by Bank (other than as a
result of Bank's or Customer's negligence or willful misconduct) in
connection with actions taken or not taken by Bank solely at the
request or order of Broker in accordance with the terms hereof.
Under no circumstances shall Bank be liable to Customer or Broker for
consequential damages. However, while this is not a complete list of
recoverable damages, Bank acknowledges liability for the following:
(a) interest losses for the period until misdelivered securities or
funds are correctly delivered (and receipt acknowledged); (b) direct
expenses from any necessary alternative means of delivery of
securities or funds; (c) fines; (d) penalties; and (e) reasonably
attorney's fees are not consequential damages.
20. Notwithstanding anything to the contrary in this or any other
Agreement, it is hereby agreed that:
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(a) Liabilities or other obligations relating to a particular
Pledge Account shall be liabilities or obligations of that Pledge
Account only and not of any other Pledge Account and shall be
paid or performed only from the assets in that Pledge Account or
the proceeds thereof without access to any other assets of
Customer.
(b) Property held in a particular Pledge Account shall not be
commingled with the property of any other Pledge Account.
(c) Broker shall not have access to Collateral in any Pledge
Account established and maintained by Customer other than the
applicable Pledge Account established and maintained pursuant to
this Agreement Such access shall be governed by, and shall only
be in accordance with, this Agreement.
20. Paragraphs 19 and 20 shall survive the termination of this Agreement.
DATE: PRUDENTIAL INVESTMENT CORPORATION, on
behalf of THE PRUDENTIAL SERIES FUND, INC.
By:
--------------------------
TITLE: VICE PRESIDENT
-----------------------
DATE: XXXXXXX, SACHS & CO.
By: /s/ XXXXXX X. XXXXXXXX
-------------------------
TITLE: VICE PRESIDENT
----------------------
DATE: INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ XXXX XXXXX
-------------------------
TITLE: VICE PRESIDENT
----------------------
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SCHEDULE A
- Conservative Balanced Portfolio
- Flexible Managed Portfolio
- Equity Income Portfolio
- Equity Portfolio
- Natural Resources Portfolio
- Government Income Portfolio
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AMENDED SCHEDULE A
AS OF FEBRUARY 27,1998
PRUDENTIAL SERIES FUND, INC.
- Conservative Balanced Portfolio
- Flexible Managed Portfolio
- Equity Income Portfolio
- Equity Portfolio
- Natural Resources Portfolio
- Government Income Portfolio
- Small Capitalization Stock Portfolio
- Stock Index Portfolio
- Xxxxxxxx Portfolio
