EXHIBIT 23(g)(2)
FORM OF SPECIAL CUSTODY ACCOUNT AGREEMENT
AGREEMENT ("Agreement"), dated as of ______________, by and among Custodial
Trust Company, in its capacity as Custodian hereunder ("Custodian"), Xxxx
Xxxxxxxxx Variable Insurance Trust ("Customer"), and BEAR, XXXXXXX SECURITIES
CORP. ("Broker").
WHEREAS, Broker is a securities broker-dealer and is a member of several
national securities exchanges; and
WHEREAS, Customer desires from time to time to execute various securities
transactions, including short sales (which are permitted by the investment
policies of Customer), and in connection therewith has executed the Customer
Agreement (as defined herein) which provides for margin transactions; and
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Customer and Broker, as applicable, with the provisions of
Regulation T of the Board of Governors of the Federal Reserve System, the margin
rules of various exchanges and other applicable margin requirements ("Margin
Rules") and other laws, rules and regulations ("Other Regulations"); and
WHEREAS, to assist Broker and Customer in complying with the Margin Rules
and Other Regulations, Custodian is prepared to act as Custodian to hold
Collateral as defined below;
NOW, THEREFORE, Customer, Custodian and Broker hereby agree as follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
(a) "Adequate Margin" means Collateral having such value as is adequate, in
Broker's judgment under the Margin Rules and the internal policies of Broker, to
secure the Secured Obligations.
(b) "Advice from Broker" or "Advice" means a written notice or instruction
provided to Customer or Custodian by mail, telegram, personal delivery or
facsimile, PROVIDED, that in respect of Customer only, Advice also means a
notice, instruction or information provided, or made available to, Customer by
electronic mail or other internet or electronic means, including without
limitation, by providing Customer with access to, or use of, an internet site,
or an on-line or other electronic system for
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account access, trading, order entry or other service, and PROVIDED FURTHER,
that Advice for the deposit or posting of initial or additional Collateral or
with respect to Broker's ability to effect a short sale for Customer may be
given orally. With respect to any short sale or Closing Transaction, the Advice
from Broker may be communicated by means of the standard confirmation in use by
Broker and provided or made available to Customer or Custodian, as applicable.
Anything herein to the contrary notwithstanding, any Advice from Broker
communicated to Custodian, as aforesaid, and directing transfer or redemption of
any Financial Asset comprising the Collateral shall constitute an Entitlement
Order of Broker. With respect to substitutions or releases of Collateral, Advice
from Broker means a written notice signed by Broker and sent or transmitted to
Custodian. An authorized agent of Broker will certify to Customer and Custodian
the names and signatures of those employees who are authorized to sign an Advice
from Broker, which certification may be amended from time to time. When used
herein, the term "Advise" means the act of sending an Advice from Broker.
(c) "Closing Transaction" is a transaction in which Customer purchases
securities which have been sold short.
(d) "Collateral" shall mean each of (i) the Special Custody Accounts; (ii)
the assets, properties, rights and items (whether now owned or existing or
hereafter acquired or coming into existence) that are on the date of this
Agreement or may at any time and from time to time hereafter be deposited by or
on behalf of Customer to, held, contained, evidenced, represented or reflected
in or by, or related to or arising from, any Special Custody Account, including,
in each case, without limitation, (A) any and all Certificated Securities,
Uncertificated Securities, Federal Book Entry Securities, other Securities,
Financial Assets, Security Entitlements, other Investment Property, Instruments,
Accounts, General Intangibles, Documents, Securities Accounts and other
collateral accounts, Money, Proceeds of any Collateral and other property, (B)
any and all assets, properties, rights and items of the types described in
clause (A) above issued or distributed to Customer with respect to any
Collateral as dividends, interest payments and other distributions or as a
result of any amendment of the certificate of incorporation or other charter
documents, merger, consolidation, redesignation, reclassification, purchase or
sale of assets, dissolution, or plan of arrangement, compromise or
reorganization of the issuer of any Collateral, and (C) any rights incidental to
the ownership of any Collateral, including voting, conversion and registration
rights and rights of recovery for violations of applicable securities laws; and
(iii) any Proceeds of any of the foregoing, including without limitation, to the
extent not otherwise covered above, the proceeds of the exercise, redemption,
sale or exchange of any Collateral.
(e) "Customer Agreement" means the Institutional Account Agreement, among
Customer, Broker and the affiliates of Broker party thereto, as in effect from
time to time or any successor or replacement agreement thereto.
(f) "Default" has the meaning assigned to that term in Section 6.
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(g) "DTC" means The Depository Trust Company or any successor thereto.
(h) "DTC Participant" means any Person that is eligible to maintain, and
maintains, one or more accounts with the DTC.
(i) "Eligible Assets" means, collectively, cash and such other assets,
properties, rights and items as Broker shall from time to time Advise Customer
are acceptable to Broker.
(j) "Fed" means the Federal Reserve Bank.
(k) "Fed Member" means any Person that is eligible to maintain, and
maintains, one or more book-entry accounts in the name of such Person with the
Fed.
(l) "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.
ss. 306.115 through ss. 306.122.
(m) "Federal Book Entry Securities" means Securities and other Collateral
maintained in the form of entries on the records of the Fed.
(n) "Insolvency" means that: (i) either Customer or Custodian 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 or Custodian 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 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 undismissed or unstayed for a
period of 60 days or any of the actions sought in such proceeding (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) either Customer or
Custodian shall take any corporate, partnership or other action to authorize, or
shall approve, consent to or acquiesce in, any of the actions set forth above in
this definition.
(o) "Instructions from Customer" or "Instructions" means a request,
direction or certification in writing signed by Customer and sent to Custodian
or Broker by mail, telegram, personal delivery or facsimile. An officer of
Customer will certify to
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Custodian and Broker the names and signatures of those persons authorized to
sign the Instructions, which certification may be amended or transmitting from
time to time. When used herein, the term "Instruct" shall mean the act of
sending an Instruction from Customer.
(p) "NYUCC" means the Uniform Commercial Code as in effect from time to
time in the State of New York.
(q) "Person" means an individual, partnership, corporation, firm, business
trust, joint stock company, trust, unincorporated association, joint venture,
association, company, division of a corporation, governmental authority or other
entity of whatever nature.
(r) "Receipt of Securities" means receipt by Custodian of (1) securities in
proper form for transfer; or (2) a written or telegraphic advice from a
registered clearing agency that securities have been credited to the account of
Custodian for any Special Custody Account.
(s) "Revised Article 8" means Article 8 of the NYUCC" (including the
corresponding, or successor, sections and provisions) as in effect from time to
time.
(t) "Revised Article 9" means Article 9 of the NYUCC (including the
corresponding, or successor, sections and provisions) or in effect from time to
time.
(u) "Right" 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, such as are listed in
the definition of "Collateral").
(v) "Secured Obligations" means any and all obligations of Customer to
Broker from time to time outstanding, including without limitation Obligations
as defined in the Customer Agreement and any obligation hereunder.
(w) "Security Interest" has the meaning assigned to that term in Section
2(b).
(x) "Special Custody Account" has the meaning assigned to that term in
Section 2(a).
The following terms have the respective meanings assigned in the NYUCC:
"Account," "Certificated Security," "Chattel paper," "Control," "Deliver,"
"Delivery," "Documents," "Entitlement order," "Entitlement holder," "Financial
Asset," "General Intangibles," "Investment Property," "Money," "Proceeds,"
"Securities Account," "Securities Intermediary," "Securities Intermediary's
Jurisdiction," "Security," "Security Entitlement," and "Uncertificated
Security".
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2. SPECIAL CUSTODY ACCOUNTS.
(a) OPENING SPECIAL CUSTODY ACCOUNTS. Custodian shall open one or (at the
request of Broker) more separate special custody accounts, each such account to
be entitled "Special Custody Account for Bear, Xxxxxxx Securities Corp. as
Pledgee of ___________________" (each a "Special Custody Account") and shall
hold in each Special Custody Account all cash and other assets, properties,
items and rights received by Custodian from time to time, pursuant to this
Agreement, for deposit (as Advised by Broker or Instructed by Customer) into
such Special Custody Account. Each Special Custody Account shall be a Securities
Account in the name of Customer and within the sole dominion and Control of
Broker. Customer shall deposit Eligible Assets into each Special Custody
Account. Customer shall insure that the value (as from time to time determined
by Broker in its judgment exercised in good faith and notified by Broker to
Customer) of all Eligible Assets from time to time on deposit in the Special
Custody Account(s) is at least equal to the Adequate Margin for the Secured
Obligations (as from time to time determined by Broker in its judgment exercised
in good faith and notified by Broker to Customer). Upon Advice that the value
(so determined) of the Eligible Assets in the Special Custody Account(s) is less
than the Adequate Margin for the Secured Obligations, Customer shall promptly
deposit therein additional Eligible Assets with a value (so determined)
sufficient to remedy such deficiency. Customer agrees to Instruct Custodian (and
Custodian agrees to comply with such Instructions) as to the cash and other
assets, properties, items and rights which Custodian is to deposit and maintain
in each Special Custody Account and is to identify on Custodian's books and
records as subject to Broker's Security Interest. All Collateral shall be held
by Custodian as agent of and Custodian for Broker and may be released only in
accordance with the terms of this Agreement or as required by applicable law.
(b) SECURITY INTEREST. Customer hereby grants to Broker, for the benefit
of the Bear Xxxxxxx entities (as defined in the Customer Agreement), a
continuing lien on and security interest in all Collateral (the "Security
Interest") as collateral security for the payment and performance when due or
required to be performed (whether at the scheduled performance date, by
acceleration or otherwise) of the Secured Obligations, which Security Interest
shall, to the fullest extent provided by law of the State of New York, be a
first priority perfected security interest. The Collateral shall at all times
remain the property of Customer subject only to the extent of the interest and
rights therein of Broker as pledgee and secured party thereof. Such Security
Interest shall terminate at such time as Collateral is released from Special
Custody Account as provided herein. Each of Customer, Broker and Custodian
hereby agrees that all Collateral will be held for Broker by Custodian as
Securities Intermediary, on behalf of Broker separate and apart from any other
property of Customer which may be held by Custodian.
(c) CUSTODIAN REPRESENTATIONS, ETC. Custodian represents, warrants,
covenants and agrees as follows:
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(i) Custodian is and will at all times remain, and will at all times
maintain the Special Custody Account(s) and all other Collateral in its
capacity as, (A) a "bank" (as defined in Section 3(a)(6) of the Securities
Exchange Act of 1934, as amended), (B) a Securities Intermediary with
notice of Broker's Security Interest, and (C) 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 such other clearing
corporation as Broker shall agree. Custodian shall insure 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 customer accounts with the DTC or such other clearing
corporation in accordance with NYUCC Article 8. Custodian shall also insure
that all Collateral consisting of Federal Book Entry Securities is
appropriately reflected in Custodian'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.
(ii) Custodian shall cause each Special Custody Account and the Collateral
contained therein or credited thereto 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). Custodian shall not deposit into any Special Custody
Account any cash, assets, properties, rights or items other than in
accordance with this Agreement.
(iii) This Agreement is the legal, valid and binding obligations of
Custodian, enforceable against Custodian in accordance with its respective
terms.
(iv) The Collateral is not, and will not be, subject to (and Custodian
hereby irrevocably waives) any Right in favor of Custodian or any Person
claiming through Custodian (other than the Security Interest and the Rights
of Customer permitted pursuant to this Agreement). Custodian has not
received any notice, and does not know, of any Right of any Person (other
than the Security Interest and the Rights of Customer permitted pursuant to
this Agreement). Any Rights that Customer may have in the Collateral shall
be subject in all respects to the Security Interest in accordance with this
Agreement.
(v) Each Special Custody Account is, and will (and Custodian has taken
and shall continue to take all steps to insure that such Special Custody
Account will) at all times remain, under the sole dominion and Control of
Broker. To that end, all Certificated Securities and Uncertificated
Securities will, by virtue of being held under such dominion and Control,
be deemed to have been Delivered to Broker.
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(vi) Custodian will treat all Collateral (including, without limitation,
all cash comprising the Collateral) 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). Custodian shall (A)
hold all Collateral solely for the benefit of Broker, (B) comply with any
and all Entitlement Orders originated by Broker (without further consent by
Customer, any other Entitlement Holder or any other Person), (C) accept
instructions as to disposition of the Collateral, only from Broker and from
no other Person (whether from Customer, any other Entitlement Holder or
other Person), (D) except as contemplated by Section 8(i), accept other
Entitlement Orders only from Broker and from no other Person (whether from
Customer, any other Entitlement Holder or other Person) and (E) not release
to Customer (except as otherwise specified in this Agreement), dispose of,
or pledge, re-pledge, hypothecate or rehypothecate, or otherwise apply to
the benefit of (except otherwise specified in this Agreement) Custodian,
Customer, any other Entitlement Holder (other than Broker) or any other
Person, any of the Collateral without the prior written consent of Broker.
(vii) As promptly as practicable, Custodian (A) shall give all notices and
directions, and will take all actions, on its part required to be given or
taken (including, without limitation, all notices and directions to the DTC
and the Fed) to preserve and protect the validity, perfection and priority
of the Security Interest, (B) shall provide Broker and Customer or
Customer's designated agent with written confirmation of each transfer into
and out of each Special Custody Account. Custodian shall also confirm in
writing to Broker and Customer all pledges, releases or substitutions of
Collateral, shall supply Broker and Customer with a monthly statement of
Collateral held, and transactions in each Special Custody Account for such
month and, upon request of Broker, shall notify Broker of the types and
value of Collateral carried in each Special Custody Account (it being
understood that Custodian shall have no responsibility for determining the
value of Collateral) and (C) shall be solely responsible to the Customer
for notifying the Customer of capital change information and corporate
actions of which Custodian receives notice affecting securities held by it
in a Special Custody Account including, but not limited to, securities
called for redemption, the organization of protective committees,
reorganizations, mergers, consolidations or similar proceedings and for
following Customer's Instructions in relation to the foregoing.
(d) EXCESS COLLATERAL. Upon the request of Customer, Broker shall Advise
Custodian and Customer of any Collateral in any Special Custody Account in
excess of the Adequate Margin then required for the Secured Obligations. At
Customer's
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request and upon Broker's Advice, such excess shall be transferred from such
Special Custody Account to an account of Customer at Custodian. 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.
(e) SUBSTITUTION OF COLLATERAL. Upon the request of Customer, an item or
items of Collateral in a Special Custody Account may be returned to Customer
upon the deposit by Customer of additional Eligible Assets into such Special
Custody Account so as to maintain the value (as determined by Broker as provided
in Section 2(a)) of the Eligible Assets in such Special Custody Account to that
which is at least equal to Adequate Margin for the Secured Obligations (as
determined by Broker as provided in Section 2(a)). Upon such a request and upon
Broker's Advice, which Advice will not be given prior to the deposit of the
additional Eligible Assets as aforesaid, the item or items of Collateral to be
returned to Customer shall be transferred from the applicable Special Custody
Account to an account of Customer at Custodian.
(f) ACCOUNTS AND RECORDS. Custodian shall maintain accounts and records
for the Collateral in each Special Custody Account to the extent necessary to
comply with and as more fully described in Sections 2(c) and 5(a). Custodian
confirms and agrees that it will make entries in its books of account showing
Broker's first and prior Security Interest in the Collateral.
(g) TAX REPORTING. Customer, Custodian and Broker agree that all items of
income, gain, expense and loss recognized in any Special Custody Account shall
be reported by Custodian to the Internal Revenue Service and all state and local
taxing authorities under the name and taxpayer identification number of
Customer.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
(a) SHORT SALES. From time to time, Customer may place orders with Broker
for the short sale of securities. Prior to the acceptance of such orders, Broker
will advise Customer of Broker's ability to borrow such securities or other
properties and acceptance of short sale orders will be contingent upon same.
(b) OPEN SHORT SALES BALANCE. Broker shall, based on the closing market
price on each business day, compute the aggregate net credit or debit balance on
Customer's open short sales and Advise Customer or Customer's designated agent
by 11:00 am New York time on the next business day (each a "Determination Day")
of the amount of the net debit or credit, as the case may be. If a net debit
balance exists on a Determination Day, Customer will cause an amount equal to
such net debit balance to be deposited in a Special Custody Account or paid to
Broker by the close of business on such Determination Day. If a net credit
balance exists on a Determination Day, Broker will instruct Custodian to release
the amount of such net credit from the Special Custody
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Account to Customer by the close of business on such Determination Day. As
Customer's open short positions are marked to market each business day, payments
will be made to or from the Special Custody Account, by or to Customer, to
reflect changes (if any) in the credit or debit balances. To the extent payments
are not made as aforesaid, Broker will charge interest on debit balances and pay
interest on credit balances. Balances will be appropriately adjusted when short
sales are closed out.
4. PLACING ORDERS
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
hereby authorizes Broker to xxxx such order as being "short", and when placing
with Broker any order to sell long for Customer's account, will designate the
order as such and hereby authorizes Broker to xxxx such order as being "long".
Any sell order which Customer shall designate as being for long account as above
provided is for securities then owned by Customer and, 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 then to deliver such securities to Broker 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 by applicable law).
5. CERTAIN RIGHTS AND DUTIES OF CUSTODIAN
(a) GENERALLY. Custodian shall receive and hold in each Special Custody
Account, as agent of and Custodian for Broker and upon the terms of this
Agreement, all Collateral required (as Advised by Broker or Instructed by
Customer) to be deposited into such Special Custody Account and, except as
provided in Section 5(b), shall receive and hold all monies and other property
paid, distributed or substituted in respect of such Collateral or realized on
the sale or other disposition of such Collateral; PROVIDED, however, that
Custodian shall have no duty to require any money or securities to be delivered
to it or to determine that the amount and form of assets delivered to it comply
with any applicable requirements. Custodian may hold Securities in each Special
Custody Account in bearer, nominee, book entry, Securities Entitlement or other
form and in depository or clearing corporation, with or without indicating that
such Securities are held hereunder; PROVIDED, however, that all Securities and
other Collateral held in a Special Custody Account shall be identified on
Custodian's records as subject to this Agreement and Broker's first and prior
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 nominees harmless from any liability as holder of record.
(b) DIVIDENDS AND INTEREST. Any dividends or interest paid with respect to
the Collateral held in any Special Custody Account shall, when collected, be
paid by Custodian to Customer or Customer's designee; PROVIDED that, upon Advice
of Broker to Custodian that a Default has occurred and is continuing (and so
long as Broker shall not have Advised Custodian that such Default is no longer
continuing), Custodian shall apply
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such dividends and interest in accordance with the Advice from time to time of
Broker to Custodian.
(c) SECURITY INTEREST. Except as otherwise specified in this Agreement,
Custodian shall have no responsibility for the validity or enforceability of the
Security Interest.
(d) LIMITATION OF CUSTODIAN'S LIABILITY. Custodian's duties and
responsibilities are set forth in this Agreement. Custodian shall act only upon
receipt of Advice from Broker regarding release or substitution of Collateral.
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 negligence and may rely and
shall be protected in acting upon any Advice, notice, Instruction or other
communication which it reasonably believes to be genuine and authorized. 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) imposed on or incurred by Custodian arising out of any action or
omission of Custodian in accordance with any notice, instruction or Advice of
Broker under this Agreement, except for losses or liabilities arising out of
Custodian's negligence, recklessness or willful misconduct. 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 of the
Board of Governors of the Federal Reserve System and the other Margin Rules, or
with any rules or regulations of the OCC. Custodian shall not be liable to any
party for any acts or omissions of the other parties to this Agreement.
(e) COMPENSATION. Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be agreed
upon in writing between Customer and Custodian.
6. DEFAULT
In the event (each a "Default") of (i) failure by Customer to maintain
Adequate Margin in respect of any Secured Obligation as herein provided, or (ii)
failure by Customer to make any payment hereunder or under the Customer
Agreement when due (including, upon demand by Broker, payment of any losses
sustained by Broker as may occur under circumstances contemplated in Section 3
above), or (iii) failure by Customer or Custodian to timely comply with any
obligation on Customer's or Custodian's part to be performed or observed under
this Agreement or the Customer Agreement or (iv) failure of any representation
or warranty of Customer or Custodian hereunder to be accurate in any material
respect or (v) Customer's or Custodian's Insolvency, then, upon any such
Default, Broker shall have the right to (1) effect a Closing Transaction or a
buy-in of any securities of which Customer's account may be short, (2) cause
such Special Custody Account to be re-registered in Broker's own name or
transfer such Special Custody Account to another Securities Intermediary in
Broker's sole name, (3) remove any Collateral from such Special Custody Account
and register such Collateral in Broker's name or in the name of Broker's
Securities Intermediary, agent
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or nominee or any of their nominees, (4) exercise any voting, conversion,
registration, purchase or other Rights of a holder of any Collateral 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, (5) collect, including by legal action, any notes, checks
or other instruments for the payment of money included in the Collateral and
compromise or settle with any obligor of such instruments, and (6) exercise any
and all rights and remedies provided under the Customer Agreement, the NYUCC,
Revised Article 8 and Revised Article 9 or otherwise available under applicable
law. Upon Advice from Broker (stating that, pursuant to this Agreement, the
condition precedent to Broker's right to receive Collateral (including without
limitation all Proceeds thereof) free of payment has occurred), Custodian shall
deliver such Collateral free of payment to Broker. Custodian will provide prompt
telephone notice to Customer of any receipt by Custodian of Advice from Broker
to deliver Collateral free of payment, and shall promptly effect delivery of
Collateral to Broker. Each sale or purchase of Collateral may be made according
to Broker's judgment and may be made at Broker's discretion, in any commercially
reasonable manner but with no obligation to utilize third party pricing. Until
there is a Default, unless Instructed by Customer, the Broker shall not sell or
Advise the Custodian to sell any Securities held in a Special Custody Account.
7. LIMITATION OF BROKER 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 gross negligence, willful misconduct or bad faith. Notwithstanding
anything set forth in this Agreement, Broker shall not be liable for any losses
caused directly or indirectly by any inability of Broker to perform occasioned
by suspension of trading, wars, civil disturbances, strikes, natural calamities,
labor or material shortages, government restrictions, acts or omissions of
exchanges, specialists, markets, clearance organizations or information
providers, delays in mails, delays or inaccuracies in the transmission of orders
or information, governmental, exchange or self-regulatory organization laws,
rules or actions, or any other causes beyond Broker's control, or for any
consequential, incidental, punitive, special or indirect damages, economic loss
or lost profits, even if Broker is advised of the possibility of such damages or
loss.
8. CUSTOMER REPRESENTATIONS, ETC.
Customer represents, warrants, covenants and agrees that:
(a) Customer is and at all times during the life of this Agreement will be
the lawful legal or beneficial owner of the Collateral, in each case (i) with
full power and authority to sell, transfer, assign, convey, contribute or
otherwise dispose of the Collateral, subject to the Security Interest
(including, without limitation, to grant the Security Interest to Broker and to
bestow upon Broker all the rights and remedies
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thereunto appertaining under applicable law or pursuant to this Agreement), and
otherwise to deal (in accordance with this Agreement and the Customer Agreement)
with, the Special Custody Account(s) and the cash and the other assets,
properties, rights and items from time to time constituting, or purporting to
constitute, Collateral and (ii) free of any and all Rights whatsoever (other
than the Security Interest).
(b) 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 its rights and remedies hereunder.
(c) This Agreement constitutes the legal, valid and binding obligation of
Customer, enforceable against Customer in accordance with its terms, subject to
applicable bankruptcy reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and applicable principles.
(d) 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
insure that each Special Custody Account is, and will at all times remain under
the dominion and Control of Broker.
(e) The execution, delivery and performance of this Agreement and the
Customer 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.
(f) 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 Customer 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
Customer Agreement or at law.
(g) Customer shall take all steps requested by Broker to secure for
Broker, its successors and assigns the benefits of this Agreement, including (i)
such steps as may be requested by Broker to perfect the security interests
contemplated by this Agreement, and (ii) whether or not a Default has occurred,
endorsing and delivering checks, notes and other instruments for the payment of
money in the name and on behalf of Customer, endorsing and delivering securities
certificates in the name and on behalf of Customer, executing and delivering in
the name and on behalf of Customer Instructions
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to the issuers of Uncertificated Securities and executing and filing in the name
and on behalf of Customer financing statements and continuations and amendments
to financing statements in any State of the United States and Forms 4, 5, 144
and Schedules 13D and 13G with the United States Securities and Exchange
Commission. 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.
(h) 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 with respect thereto.
(i) Customer shall be solely responsible for issuing Instructions directly
to Custodian (and shall not seek to issue such Instructions to Broker) in
relation to capital change information and corporate actions of which Customer
receives notification from the Custodian pursuant to Section 2(c)(vii) of this
Agreement affecting securities held by Custodian in the Special Custody
Account(s) including, but not limited to, securities called for redemption, the
organization of protective committees, reorganizations, mergers, consolidations
or similar proceedings.
9. TERMINATION
(a) Any of the parties hereto may terminate this Agreement by notice in
writing to the other parties hereto; PROVIDED, however, that (i) the status of
any short sales, and of Collateral held at the time of such notice to margin
such short sales shall not be affected by such termination until the release of
such Collateral pursuant to applicable law or regulations or rules 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 unless and to the extent that, immediately before such termination,
(A) Customer shall have also been entitled to terminate this Agreement in
accordance with clause (ii) above or (B) the Collateral shall have been
transferred to Broker or its designee, and Broker shall continue to have a valid
and enforceable perfected first-priority lien and Security interest in the
Collateral.
(b) The Security Interest shall terminate (i) with respect to Collateral
released or paid pursuant to this Agreement, upon such release or payment; and
(ii) in any other case, upon the termination of this Agreement. Any Collateral
in which the Security Interest shall have terminated in accordance with the
preceding sentence shall be transferred to Customer or its designee.
10. NOTICES
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Other than as contemplated by the term Advice, written communications
hereunder shall be sent by facsimile transmission, telegram, hand delivered or
mailed first class postage prepaid, except that written notice of termination
shall be sent by certified mail, in each case addressed (and oral communications
shall be directed to the following telephone numbers):
(a) if to Custodian, to:
Attention:
Telephone:
Facsimile:
(b) if to Customer, to:
Attention:
Telephone:
Facsimile:
(c) if to Broker, to: Bear, Xxxxxxx Securities Corp.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone: 212-272-2000
Facsimile: 000-000-0000
or, in the case of each party hereto, such other address as such party shall
notify to the other parties hereto in accordance with this Section 10.
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, Custodian is the Securities Intermediary, and the State of New York
is the Securities Intermediary's jurisdiction.
(b) Each of Custodian and Customer hereby consents (i) to the jurisdiction
of the courts of the State of New York sitting in New York City and the courts
of the United States of America for the Southern District of New York; and (ii)
that any suit, action, proceeding or dispute that may arise from time to time
out of or in connection with this Agreement or any and all of the Collateral may
be brought, or initiated and settled in such courts. Each of Custodian and
Customer waives any
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objection that it may now or hereafter have to the venue of any such suit,
action, proceeding or settlement in any such court, or that such suit,
proceeding or settlement was brought in an inconvenient forum, and agrees not to
plead or claim the same. Each of Custodian and Customer authorizes the service
of process on itself by registered or certified mail or courier service c/o its
address referred to in Section 10.
(c) To the maximum extent permitted by applicable law, each of Broker,
Customer and Custodian irrevocably waives all right to trial by jury in any
suit, action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or related to this Agreement or any and all of the
Collateral.
12. THIS AGREEMENT CONTROLS
Notwithstanding anything to the contrary set forth in the Customer
Agreement, in the event of any inconsistency between this Agreement and the
Customer Agreement, the terms of this Agreement shall prevail.
13. COUNTERPARTS
This Agreement may be executed in any number of counterparts and shall
become effective at such time as counterparts executed by all of the parties to
this Agreement have been delivered. Each copy of this Agreement that includes
counterparts executed by each party to this Agreement shall be an original
hereof.
14. CAPTIONS/HEADINGS
The captions and headings preceding the text of each section herein shall
be disregarded in connection with the interpretation of this Agreement.
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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.
Xxxx Xxxxxxxxx Variable Insurance Trust
By:
--------------------------------
Name:
Title:
Custodial Trust Company
By:
--------------------------------
Name:
Title:
BEAR, XXXXXXX SECURITIES CORP.
By:
--------------------------------
Name:
Title:
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