Exhibit (h)(17)
OPERATING AGREEMENT
This OPERATING Agreement (the "Agreement") is entered into as of September
__, 2005 by and between TRUSTMARK NATIONAL BANK, a [national banking
association] having a place of business in JACKSON, MISSISSIPPI (the
"Custodian") and XX Xxxxxx Xxxxx Bank, National Association,having a principal
place of business at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 (the
"Subcustodian") .
BACKGROUND INFORMATION
A. The Custodian has been appointed as custodian for THE PERFORMANCE FUNDS
(the "Principal') pursuant to a custody agreement (the "Custody
Agreement");
B. The Principal and the Subcustodian have entered into a Securities Lending
Agreement dated September __, 2005 (the "Securities Lending Agreement") in
order to permit the Principal to utilize the Subcustodian's securities
lending program (the "Securities Lending Program").
C. Pursuant to the Securities Lending Agreement, the Subcustodian has
established a securities lending account (the "Securities Lending Account")
to facilitate loans of securities in accordance with the Securities Lending
Agreement. Subject to the terms of this Subcustodian Agreement, the
Custodian shall deliver securities of the Principal to the Subcustodian
which are held in the accounts designated by the Principal under Section 2
hereof.
STATEMENT OF AGREEMENT
The parties hereby acknowledge the accuracy of the foregoing Background
Information and hereby agree as follows:
Section 1. Appointment of the Subcustodian. The Custodian hereby appoints
Subcustodian to hold certain securities of the Principal to be lent through the
Securities Lending Program as may be designated by the Principal under Section 2
hereof and delivered to Subcustodian subject to the terms and conditions set
forth herein. Subcustodian shall only be responsible for custody of securities
actually delivered to it and then only while they are held in and as a part of
the Securities Lending Account and not subject to a loan. All securities
accepted by Subcustodian on behalf of the Custodian under the terms of this
Agreement shall be in "street name" or other good delivery form.
1
Section 2. Designation of Securities by the Principal. The Principal may
designate the accounts that are eligible for participation in the Securities
Lending Program. The securities held in such accounts shall be delivered to
Subcustodian to be held by it in accordance with this Agreement. The Custodian
shall notify the Subcustodian in accordance with the timeframes established in
the Securities Lending Agreement if any of the securities delivered to the
Subcustodian under this Agreement have been sold or transferred or otherwise
withdrawn by the Principal from participation in the Securities Lending Program.
Section 3. Registration of Securities. Except as otherwise provided in the
Securities Lending Agreement, securities held by the Subcustodian (other than
bearer securities) shall be registered in the name of the Subcustodian or of any
nominee of the Subcustodian or in the name of any depository designated by the
Subcustodian or its nominee.
Section 4. Accounts. Securities shall be held in a separate Securities
Lending Account and, except for securities held in a Securities Depository or
Book Entry Account as defined below, physically segregated at all times from
those of any other persons, firms, or corporations. The Subcustodian may hold
such securities in: (i) the bank vault of the Subcustodian; (ii) such other
banks or trust companies as Subcustodian may deem appropriate; (iii) its
accounts with a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934, which acts
as a securities depository (the "Securities Depository"); or (iv) a book-entry
account which is maintained for the Subcustodian by a Federal Reserve Bank (the
"Book-Entry Account").
So long as Subcustodian maintains any accounts pursuant to (iii) or (iv)
above for Principal, Subcustodian shall: (i) identify as belonging to Custodian
a quantity of such securities in the fungible bulk of securities (A) registered
in the name of Subcustodian or its nominee, or (B) shown on Subcustodian's
account on the books of the Securities Depository, the Book-Entry Account or
Subcustodian's agent; (ii) promptly send to the Custodian reports it receives
from the appropriate Federal Reserve Bank or Securities Depository on its system
of internal accounting control; and (iii) send to the Custodian such reports of
the systems of internal accounting control of Subcustodian and its agents
through which such securities are deposited as are available and as the
Custodian may reasonably request from time to time.
Subject to Sections 13 and 14, the Subcustodian shall provide Custodian
with remote on-line computer access to the Securities Lending Account.
Section 5. Delivery of Cash and Securities. The Subcustodian shall release
and deliver cash or securities from the Securities Lending Account in connection
with a lending transaction in accordance with the Securities Lending Agreement.
Upon receipt of instructions from the Custodian specifying the cash or
securities to be delivered, the Subcustodian shall deliver to the Custodian cash
or securities held in the Securities Lending Account that have not been
transferred to a Borrower under the Securities Lending Agreement. In providing
the services hereunder, it is understood that the Subcustodian shall neither
render advice to the Custodian, or
2
the Principal as to the value of securities or other property, or make
recommendations as to the advisability of investing in, purchasing, or selling
securities or other property, nor shall the Subcustodian, either directly or
indirectly, have any discretionary authority or control with respect to
purchasing or selling securities or other property for the Principal.
Section 6. Collateral; Collection of Income for Securities Not Subject to a
Loan. The Principal's rights concerning Collateral (as defined in the Securities
Lending Agreement) and income and other payments with respect to securities that
are subject to a loan shall be as set forth in the Securities Lending Agreement.
Subcustodian shall collect all income, principal, and other payments with
respect to registered securities held in the Securities Lending Account and not
out on loan to which the Principal shall be entitled by law or pursuant to
custom in the securities business, and shall collect all income and principal
and other payments with respect to bearer securities if, on the date of payment
by the issuer, such securities are held by Subcustodian in the Securities
Lending Account and not out on loan. Subcustodian shall detach and present for
payment all coupons and other income and principal items requiring presentation
as and when they become due, shall collect dividends and interest when due on
securities held in the Securities Lending Account, and shall endorse and deposit
for collection, in the name of Custodian, checks, drafts, and other negotiable
instruments on the same day as received. Subcustodian shall wire transfer to the
Custodian daily by 4:30 p.m. Eastern Standard Time in immediately available
funds, all net payments actually collected with respect to the securities held
in the Securities Lending Account.
Subject to the Securities Lending Agreement, Subcustodian shall not be
under any obligation or duty to take action to effect collection of any amount,
if the securities on which such amount is payable are in default and payment is
refused after due demand or presentation. Subcustodian will, however, notify the
Custodian in writing within a reasonable period of time of such default and
refusal to pay.
Section 7. Authorization to Loan Securities. Pursuant to the Securities
Lending Agreement, the Principal has authorized the Subcustodian to transfer
pursuant to one or more Securities Borrowing Agreements as defined in the
Securities Lending Agreement and against receipt of Collateral as provided for
therein, securities delivered to the Subcustodian by the Custodian.
Section 8. Instructions. Instructions furnished to the Subcustodian by the
Custodian with respect to securities held by the Subcustodian under this
Agreement shall be signed by such officer or officers of the party giving such
instructions as are authorized from time to time by such party (each an
"Authorized Person"); provided, however, that the Subcustodian is authorized to
accept and act upon orders, whether given orally, by telephone or otherwise,
which the Subcustodian reasonably believes to be given by an Authorized Person.
The Custodian shall promptly confirm such orders electronically or in writing,
but the Subcustodian shall not be responsible for the failure of an Authorized
Person to confirm oral instructions in writing or the failure of such written
confirmation to conform to oral instructions. The records of Subcustodian shall
be presumed to reflect accurately any oral instructions given by an Authorized
Person or a
3
person believed by the Subcustodian to be an Authorized Person.
Section 9. Fees. The Subcustodian shall receive any fees due to it under
the Securities Lending Agreement.
Section 10. Voting and Other Actions. If a security is not out on loan
pursuant to a Securities Borrowing Agreement as defined in the Securities
Lending Agreement, Subcustodian shall promptly deliver or mail to the Custodian
all forms of proxies and all notices of meetings affecting or relating to
securities held for the account of the Custodian. Neither Subcustodian nor its
nominee shall vote any securities or execute any proxy to vote the same or give
any consent to take any other action with respect thereto.
Subcustodian shall release and deliver securities held in the Securities
Lending Account and not out on loan and take any other action as directed by the
Custodian, with respect to dividends, splits, distributions, spin-offs, puts,
calls, conversions, redemptions, tenders, exchanges, mergers, reorganizations,
rights, warrants, or any other similar activity relating to the securities.
Subcustodian shall request direction of Custodian upon receipt of actual notice
where Principal has an option as to any such activity for securities in the
Securities Lending Account and not out on loan. For purposes of this paragraph,
Subcustodian shall be deemed to have actual notice if any such activity is
published in one or more of the following publications: X.X. Xxxxx'x Munibase
System, Financial Card Service, Xcitek, Inc., Standard & Poors' Called Bond
Listing, Depository Trust Reorganization Notices, and The Wall Street Journal.
If Subcustodian does not have actual notice of such activity, any such activity
will be handled by Subcustodian on a "best efforts" basis.
Section 11. Responsibilities. The Subcustodian shall use the same care with
respect to the receiving, safekeeping, handling, and delivering of securities,
as applicable, held under this Agreement as it uses in respect of its own
similar securities, but it need not maintain any special insurance for the
benefit of the Custodian or the Principal. The Subcustodian shall not be liable
for any action taken or thing done by it in carrying out the terms and
provisions of this Agreement if done in good faith and without negligence or
willful misconduct on the Subcustodian's part. The Custodian shall not be liable
for any action taken or thing done by it in carrying out the terms and
provisions of this Agreement if done in good faith and without negligence or
willful misconduct on the Custodian's part.
As long as and to the extent that it exercises reasonable care,
Subcustodian shall not be responsible for the title, validity, or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and Subcustodian shall be held harmless in acting
upon instructions from an Authorized Person under this Agreement or in
accordance with the Securities Lending Agreement.
Subcustodian shall be entitled to rely upon and may act upon advice of
counsel (who may or may not be counsel for the Custodian) on all matters, and
shall be without liability for any
4
action reasonably taken or omitted pursuant to such advice.
If the Custodian requires Subcustodian to take any action with respect to
securities, which action involves the payment of moneys or which action may, in
the opinion of Subcustodian, result in Subcustodian's or its nominee's being
liable for the payment of money or incurring liability of some other form, the
Custodian, as a pre-requisite to requiring Subcustodian to take such action,
shall provide assurance to Subcustodian of payment of such moneys or liability
in an amount and form satisfactory to Subcustodian.
Subcustodian shall not be responsible or liable for any failure or delay in
the performance of its obligations under this Agreement arising out of or caused
directly or indirectly, by circumstances beyond its reasonable control,
including without limitation; acts of God, earthquakes, fires, floods, wars,
civil or military disturbance, sabotage, epidemics, riots, terrorism,
interruptions, loss or malfunctions of utilities or communications service;
accidents, labor disputes, acts of civil or military authority, governmental
action, or inability to obtain labor, material, equipment, or transportation.
Subcustodian shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth in this Agreement
and the Securities Lending Agreement.
Section 12. Records and Reports. Custodian hereby acknowledges that it may
have the right to receive broker confirmations within the time period prescribed
by 12 C.F.R. Section 12.5 at no additional cost. In lieu of receiving such
confirmations within such time period, Custodian and Subcustodian agree to the
alternative procedures set forth in this Section. The Subcustodian shall furnish
statements of account monthly or in such other manner and frequency as the
Subcustodian and the Custodian shall agree.
Section 13. Data Access. If the Custodian has requested on line access to
the records of the Securities Lending Account and the Subcustodian has issued to
the Custodian a data access security system in order that the Custodian may have
such access to certain data and functions, the Custodian agrees: (a) to access
data and functions only in accordance with the Data Access Operating Procedures
incorporated herein as Section 14 and to regard and preserve as confidential all
information obtained with respect to the issuance to the Custodian of a data
access security system; (b) to access data and function solely for its own
internal use and benefit; (c) to discontinue use of the data access security
system at any time for security reasons upon notice from the Subcustodian; (d)
upon request to cause the Custodian's internal auditor's to verify to the
Subcustodian that data access is restricted to authorized persons; (e) to
indemnify the Subcustodian against and to hold the Subcustodian harmless from
all liability, claims, loss and demands whatsoever, including reasonable
attorney's fees, howsoever arising or incurred because of or in connection with
the access of data and functions by the Custodian and the use by the Custodian
or any of its employees or agents, whether authorized or unauthorized, of the
data
5
access security system; and (f) to designate a duly authorized person to serve
as the Data Security Administrator in accordance with the Data Security
Administrator Designation form annexed hereto as Schedule I.
Section 14. Protection of Equipment and Information. The databases,
computer program, screen formats, screen designs, report formats, interactive
design techniques, and other information furnished to the Custodian by the
Subcustodian as part of the services hereunder constitute copyrighted, trade
secret or proprietary information of substantial value to the Subcustodian. Such
databases, programs and other information are collectively referred to below as
"Proprietary Information." The Custodian agrees that it shall treat all
Proprietary Information as proprietary to the Subcustodian and that it shall not
divulge any Proprietary Information to any person or organization except as
expressly permitted hereunder. Proprietary Information is furnished "as is"
without warranty. Without limiting the foregoing the Custodian agrees for itself
and its employees and agents:
(a) to use such programs and databases
(i) solely on the Subcustodian's computers or designated
Custodian devices;
(ii) solely from devices at Custodian's locations designated by
the Custodian and authorized by the Subcustodian from time
to time; and
(iii) solely in accordance with Subcustodian's applicable user
documentation;
(b) to refrain from copying or duplicating in any way (other than in
the normal course of performing processing on the Subcustodian's
computers) any part of any Proprietary Information, and, upon
request, to return any Proprietary Information upon termination
of this agreement;
(c) to refrain from obtaining unauthorized access to any programs,
data or other information to which Custodian is not entitled, and
if such access is accidentally obtained, to respect and safeguard
the same as Proprietary Information;
(d) to refrain from causing or allowing information transmitted from
the Subcustodian's computer to the Custodian's terminal to be
transmitted to another computer, terminal or other device for
other than the Custodian's own use, except upon prior approval of
Subcustodian;
(e) that the Custodian shall have access to only those transactions
authorized
6
by the Subcustodian;
(f) to honor all reasonable written requests made by the Subcustodian
to protect at the Subcustodian's expense the rights of the
Subcustodian in Proprietary Information at common law, under the
Federal copyright statute and under other Federal and state
statutes;
(g) to designate a duly authorized person to serve as the Data
Security Administrator in accordance with the Designation annexed
hereto;
(h) to request a unique user set ID for each separate user. The
request must be made in writing to Subcustodian's data security
manager.
(i) to request immediate deactivation of a user ID or deletion of
access when no longer needed or when Custodian believes security
has been violated;
(j) to limit knowledge of user IDs to authorized persons only;
(k) to not disclose passwords directly or indirectly to anyone,
including other employees or agents of the Custodian;
(l) to not store user IDS or passwords in any computer file, as part
of "automatic log on" procedure;
(m) to select unique passwords which cannot be easily guessed;
(n) to change the password every 30 days, or when the Custodian
believes the password might have become known to others, or when
the Custodian suspects a possible security violation; and
(o) to not recycle or reuse passwords.
Section 15. Effective Period, Termination and Agreement. This Agreement
shall continue in full force and effect until the Securities Lending Agreement
between Principal and Subcustodian shall be terminated and may be amended at any
time by mutual agreement of the parties hereto. This Agreement shall not
terminate with respect to loans of securities in effect under the Securities
Lending Agreement on the date of termination.
Upon termination of this Agreement, the Subcustodian shall promptly deliver
to the Custodian all property then held by the Subcustodian under this Agreement
or cash proceeds thereof.
Section 16. Communications Received by the Subcustodian . All
communications required or
7
permitted to be given under this Agreement shall be in writing (including telex,
telegraph or telefax, facsimile, or similar electronic transmittal device)
unless expressly provided otherwise, and addressed as follows:
(a) If to the Subcustodian: XX Xxxxxx Chase Bank
0 Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Securities Lending Department
(b) If to the Custodian: TRUSTMARK NATIONAL BANK
000 XXXX XXXXXXX XXXXXX, XXXX 000
XXXXXXX, XX 00000
Attn: XXXXX XXXXX
Telephone: (000) 000-0000
Telefax: (000) 000-0000
(c) If to the Principal: THE PERFORMANCE FUNDS
0000 XXXXXXX XXXX
XXXXXXXX, XX 00000
Attn: PERFORMANCE FUNDS CLIENT SERVICES
Telephone: (__________)
Telefax: (__________)
Section 17. Governing Law. This agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of New
York.
Section 18. Severability. The intention of the parties to this agreement,
is to comply fully with all laws, rules, regulations, and public policies, and
this Agreement shall be construed consistently with all laws, rules,
regulations, and public policies to the extent possible. If and to the extent
that any court of competent jurisdiction determines it is impossible to construe
any provision of this Agreement consistently with any law, rule, regulation, or
public policy and consequently holds that provision to be invalid, such holding
shall in no way affect the validity of the other provisions of this Agreement,
which shall remain in full force and effect.
Section 19. Non-Waiver. No failure by any party to insist upon compliance
with any term of this Agreement, to exercise any option, enforce any right, or
seek any remedy upon any default of any other party shall affect, or constitute
a waiver of, the first party's right to insist upon such strict compliance,
exercise that option, enforce that right, or seek that remedy with respect to
that default or any prior, contemporaneous, or subsequent default. No custom or
practice of the parties at variance with any provision of this Agreement shall
affect or constitute a waiver of, any party's right to demand strict compliance
with all provisions of this Agreement.
8
Section 20. Captions. The captions of the various sections of this
Agreement are not part of the context of this Agreement, but are only labels to
assist in locating those sections and shall be ignored in construing this
Agreement.
Section 21. Entire Agreement. This Agreement represents the entire
agreement between the parties and may not be modified or amended except by a
writing signed by the parties hereto.
9
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
executed this _________ day of ___________________, 20__.
XX Xxxxxx Xxxxx Bank, NA
(As Subcustodian)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
----------------------------------------
(As Custodian)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Acknowledged and agreed to by:
----------------------------------------
(As Principal)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
10
SCHEDULE I
DATA SECURITY ADMINISTRATOR DESIGNATION FORM
Date:
---------------
Bank One Trust Company, N. A.
Gentlemen:
As ____________________________ (title of officer or other authorized
person) of ___________________________ hereby certify that the following persons
have been duly authorized by the Custodian to serve as the Data Security
Administrator, as such term is defined in the Data Access Operating Procedures:
Name Signature
------------------------------------- ----------------------------------------
It is understood and agreed that the above-named individual is the
authorized recipient on behalf of the Custodian of (1) all documents and
correspondence assigning, confirming or otherwise containing company and user
identification codes, passwords, mnemonics, test keys, encryption keys and other
security devices, and (2) all other notices, documents and correspondence from
Subcustodian respecting the data access security system, including, without
limitation, any changes or supplements to the Data Access Operating Procedures.
Trustmark Bank
By:
---------------------------------
Printed Name:
-----------------------
Title:
------------------------------
Address:
----------------------------
Dated:
------------------------------
* In case the first signing officer is a Data Security Administrator, this
form must be signed by a second officer.
11
