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EXHIBIT (2)(j)
CUSTODIAN AGREEMENT BETWEEN CN LOAN FUND, INC. AND CITY NATIONAL BANK
CUSTODIAN CONTRACT
Between
CN LOAN FUND, INC.
and
CITY NATIONAL BANK
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TABLE OF CONTENTS
1. Employment of Custodian and Property to be Held by It .......................................4
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2. Duties of the Custodian With Respect to Property of the Funds Held By the
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Custodian....................................................................................4
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2.1 Holding Securities.................................................................4
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2.2 Delivery of Securities.............................................................5
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2.3 Registration of Securities.........................................................7
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2.4 Bank Accounts......................................................................7
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2.5 Payments for Shares................................................................7
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2.6 Availability of Federal Funds......................................................8
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2.7 Collection of Income...............................................................8
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2.8 Payment of Fund Moneys.............................................................8
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2.9 Liability for Payment in Advance of Receipt of Securities Purchased................9
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2.10 Payments for Repurchases or Redemptions of Shares of a Fund........................9
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2.11 Appointment of Agents..............................................................10
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2.12 Deposit of Fund Assets in Securities System........................................10
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2.13 Segregated Account.................................................................11
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2.14 Joint Repurchase Agreements........................................................11
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2.15 Ownership Certificates for Tax Purposes............................................12
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2.16 Proxies............................................................................12
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2.17 Communications Relating to Fund Portfolio Securities...............................12
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2.18 Proper Instructions................................................................12
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2.19 Actions Permitted Without Express Authorization....................................13
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2.20 Evidence of Authority..............................................................13
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2.21 Notice to Trust by Custodian Regarding Cash Movement...............................13
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3. Duties of Custodian With Respect to the Books of Account and Calculation of
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Net Asset Value and Net Income...............................................................13
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4. Records......................................................................................14
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5. Opinion of Fund's Independent Public Accountants.............................................14
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6. Reports to Fund by Independent Public Accountants............................................14
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7. Compensation of Custodian....................................................................15
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8. Responsibility of Custodian..................................................................15
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9. Effective Period, Termination and Amendment..................................................16
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10. Successor Custodian..........................................................................17
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11. Interpretive and Additional Provisions.......................................................17
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12. California Law to Apply......................................................................17
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13. Notices......................................................................................18
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14. Counterparts.................................................................................18
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15. Limitations of Liability.....................................................................18
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CUSTODIAN CONTRACT
This Contract between CN LOAN FUND, INC., (the "Fund"), a Maryland
corporation, organized and existing under the laws of the state of Maryland,
having its principal place of business at City National Center, 000 Xxxxx
Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx, 00000, and CITY NATIONAL BANK, a
national banking association, having its principal place of business at City
National Center, 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx, 00000,
hereinafter called the "Custodian,"
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1 Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Fund. Except as otherwise expressly provided herein, the securities and
other assets of the Fund shall be segregated from all other persons and
entities. The Fund will deliver to the Custodian all securities and cash owned
by the Fund (excluding loans and loan participations) and all payments of
income, payments of principal or capital distributions received by the Fund
with respect to all securities owned by the Fund (excluding loans and loan
participations) from time to time, and the cash consideration received by the
Fund for shares ("Shares") of common stock of the Fund as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of
the Fund held or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-custodians
upon the terms specified in the Proper Instructions.
2. Duties of the Custodian With Respect to Property of the Fund Held By the
Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of the Fund all non-cash property, including all securities
owned by the Fund, other than securities which are maintained pursuant to
Section 2.12 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System," or securities which
are subject to a joint repurchase agreement with affiliated funds pursuant
to Section 2.14. The Custodian shall maintain records of all receipts,
deliveries and locations of such securities, together with a current
inventory thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities held by it
under this Contract in such manner as the Custodian shall determine from
time to time to be advisable in order to verify the accuracy of such
inventory. With respect to securities held by any agent appointed pursuant
to Section 2.11 hereof, and with respect to securities held by any
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sub-custodian appointed pursuant to Section 1 hereof, the Custodian may
rely upon certificates from such agent as to the holdings of such agent and
from such sub-custodian as to the holdings of such sub-custodian, it being
understood that such reliance in no way relieves the Custodian of its
responsibilities under this Contract. The Custodian will promptly report to
the Fund the results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to remedy any
such shortages or discrepancies.
2.2 Delivery of Securities. The Custodian shall release and deliver securities
owned by the Fund held by the Custodian or in a Securities System account
of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in
the following cases:
(1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund, in
accordance with the provisions of Section 2.17 hereof;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Section 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own failure
to act in accordance with the standard of reasonable care
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or any higher standard of care imposed upon the Custodian by
any applicable law or regulation if such above-stated standard
of reasonable care were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered
to the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
(10) For delivery in connection with any loans of portfolio
securities of the Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified by
the Fund, (b) certificated securities of a description
specified by the Fund, registered in the name of the Fund or in
the name of a nominee of the Custodian referred to in Section
2.3 hereof or in proper form for transfer, or (c) securities of
a description specified by the Fund, transferred through a
Securities System in accordance with Section 2.12 hereof;
(11) For delivery as security in connection with any borrowings
requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing already
made, further securities may be released for the purpose;
(12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for the Fund;
(13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transaction for a Fund;
(14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection
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with distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other than
bearer securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless the Fund has
authorized in writing the appointment of a nominee to be used in common
with other registered investment companies affiliated with the Fund, or in
the name or nominee name of any agent appointed pursuant to Section 2.11 or
in the name or nominee name of any sub-custodian appointed pursuant to
Section 1. All securities accepted by the Custodian on behalf of the Fund
under the terms of this Contract shall be in "street names" or other good
delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order
by the Custodian acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund, other than cash
maintained in a joint repurchase account with other affiliated funds
pursuant to Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended, (the "1940 Act"). Funds held by
the Custodian for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other banks
or trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be qualified
to act as a custodian under the 1940 Act and that each such bank or trust
company and the funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of Directors ("Board")
of the Fund. Such funds shall be deposited by the Custodian in its capacity
as Custodian for the Fund and shall be withdrawable by the Custodian only
in that capacity. If requested by the Fund, the Custodian shall furnish the
Fund, not later than twenty (20) days after the last business day of each
month, an internal reconciliation of the closing balance as of that day in
all accounts described in this section to the balance shown on the daily
cash report for that day rendered to the Fund.
2.5 Payment for Shares. The Custodian shall make such arrangements with the
Transfer Agent of the Fund as will enable the Custodian to receive the cash
consideration due to the Fund and will deposit into the Fund's account such
payments as are received from the
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Transfer Agent. The Custodian will provide timely notification to the Fund
and the Transfer Agent of any receipt by it of payments for Shares of the
respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement between the Fund and
the Custodian, the Custodian shall make federal funds available to the Fund
as of specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks, clearing house funds, and other
non-federal funds received in payment for Shares of the Fund which are
deposited into the Fund's accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to the
Fund's custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall collect
interest when due on securities held hereunder. The collection
of income due the Fund on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in
connection therewith, other than to provide the Fund with such
information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
(2) The Fund shall promptly notify the Custodian whenever income
due on securities is not collected in due course and will
provide the Custodian with monthly reports of the status of
past due income. The Fund will furnish the Custodian with a
weekly report of accrued/past due income for the Fund. Once an
item is identified as past due and the Fund has furnished the
necessary claim documentation to the Custodian, the Custodian
will then initiate a claim on behalf of the Fund. The Custodian
will furnish the Fund with a status report monthly unless the
parties-otherwise agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of the Fund in the following cases only:
(1) Upon the purchase of securities, futures contracts or options
on futures contracts for the account of the Fund but only (a)
against the delivery of such securities, or evidence of title
to futures contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the United States or
abroad which is qualified
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under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
"pursuant to Section 2.11 hereof" registered in the name of the
Fund or in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer, (b) in
the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.12 hereof
or (c) in the case of repurchase agreements entered into
between the Fund and any other party, (i) against delivery of
the securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
(3) For the redemption or repurchase of Shares of the Fund issued
by the Fund as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Fund;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of securities for the account
of the Fund is made by the Custodian in advance of receipt of the
securities purchased, in the absence of specific written instructions from
the Fund to so pay in advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if the securities had
been received by the Custodian.
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2.10 Payment for Repurchases or Redemptions of Shares of the Fund. From such
funds as may be available for the purpose of repurchasing or redeeming
Shares of the Fund, but subject to the limitations of the Certificate of
Incorporation and any applicable votes of the Board of the Fund pursuant
thereto, the Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of shares of the Fund who
have delivered to the Transfer Agent a request for redemption or repurchase
of their shares including without limitation through bank drafts, automated
clearing-house facilities, or by other means. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act and any applicable
state law or regulation, to act as a custodian, as its agent to carry out
such of the provisions of this Section 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities System. The Custodian may deposit
and/or maintain securities owned by the Fund in a clearing agency registered
with the Securities and Exchange Commission ("SEC") under Section 17A of the
Exchange Act, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as "Securities System", in
accordance with applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following provisions:
(1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
(2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Fund;
(3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon (i) receipt of advice
from the Securities System that payment for such securities has
been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all advices
from the Securities System of transfers of securities for the
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account of the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the
Fund in the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the Securities System for
the account of the Fund.
(4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason
of any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or
from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the Securities
System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made
whole for any such loss or damage.
(7) The authorization contained in this Section 2.12 shall not
relieve the Custodian from using reasonable care and diligence
in making use of any Securities System.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and
on behalf of the Fund, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.12 hereof, (I) in accordance with the
provisions of any agreement among the Fund, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions for the Fund, (ii) for purpose
of segregating cash or government securities in connection with options
purchased, sold or written for the Fund or commodity futures contracts or
options thereon purchased or sold for the Fund, (iii) for the purpose of
compliance by the Fund with the procedures required by any release or
releases of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in
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the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account
and declaring such purposes to be proper corporate purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper Instructions,
the Custodian shall deposit and/or maintain any assets of the Fund and any
affiliated funds which are subject to joint repurchase transactions in an
account established solely for such transactions for the Fund and its
affiliated funds. For purposes of this Section 2.14, "affiliated funds"
shall include all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as investment
advisers, distributors or administrators in accordance with applicable
exemptive orders from the SEC. The requirements of segregation set forth in
Section 2.1 shall be deemed to be waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of the Fund held by it and in connection with
transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Fund or a nominee of the Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to
the Fund such proxies, all proxy soliciting materials and all notices
relating to such securities.
2.17 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Fund and the investment adviser of the Fund
all written information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by the
Fund and the maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund and the investment adviser of the Fund all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making
the tender or exchange offer. If the Fund or the investment adviser of the
Fund desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Fund shall notify the Custodian in
writing at least three business days prior to the date on which the
Custodian is to take such action. However, the Custodian shall nevertheless
exercise its best efforts to take such action in the event that notification
is received three business days or less prior to the date on which action is
required. For securities which are
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not held in nominee name, the Custodian will act as a secondary source of
information and will not be responsible for providing corporate action
notification to the Fund.
2.18 Proper Instructions. Proper Instructions as used throughout this Section
2 means a writing signed or initialed by one or more person or persons as
the Board shall have from time to time authorized. Each such writing shall
set forth the specific transaction or type of transaction involved. Oral
instructions will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect to
the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of the Fund
accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electromechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for
the Fund's assets.
2.19 Actions Permitted Without Express Authorization. The Custodian may in
its discretion, without express authority from the Fund:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund in such form that it may be
allocated to the Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Fund.
2.20 Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument
or paper reasonably believed by it to be genuine and to have been properly
executed on behalf of the Fund. The Custodian may receive and accept a
certified copy of a vote of the Board of the Fund as conclusive evidence (a)
of the authority of any person to act in accordance with such vote or (b) of
any determination of or any action by the Board pursuant to the Certificate
of Incorporation as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of written notice
to the contrary.
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2.21 Notice to Fund By Custodian Regarding Cash Movement. The Custodian will
provide timely notification to the Fund of any receipt of cash, income or
payments to the Fund and the release of cash or payment by the Fund.
3. Duties of Custodian With Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Fund to keep the books of
account of the Fund and/or compute the net asset value per share of the
outstanding Shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective private offering
memorandum ("Memorandum") and shall advise the Fund and the Transfer Agent
daily of the total amounts of such net income and, if instructed in writing by
an officer of the Fund to do so, shall advise the Transfer Agent periodically
of the division of such net income among its various components. The
calculations of the net asset value per share and the daily income of the Fund
shall be made at the time or times described from time to time in the Fund's
currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the 1940 Act, with particular attention to
Section 31 thereof and Rules 3la-1 and 3la-2 thereunder, and specifically
including identified cost records used for tax purposes. All such records shall
be the property of the Fund and shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and upon notice to the Fund, employees and
agents of the SEC. In the event of termination of this Contract, the Custodian
will deliver all such records to the Fund to a successor Custodian, or to such
other person as the Fund may direct. The Custodian shall supply daily to the
Fund a tabulation of securities owned by the Fund and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include certificate numbers
in such tabulations. In addition, the Custodian shall electronically transmit
daily to the Fund information pertaining to security trading and other
investment activity and all other cash activity of the Fund.
5. Opinion of Fund's Independent Public Accountants.
The Custodian shall take all reasonable action to obtain from year to
year favorable opinions from independent public accountants with respect to its
activities hereunder in connection with the preparation of the Fund's
registration statement, periodic reports, or any other reports to the SEC and
with respect to any other requirements of such Commission.
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6. Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants for the Fund
on the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian for the Fund under this
Contract; such reports shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund, to provide reasonable assurance that
any material inadequacies would be disclosed by such examination and, if there
are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian, and as reflected on Schedule A attached hereto.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in carrying
out the provisions of this Contract; provided, however, that the Custodian
shall be held to any higher standard of care which would be imposed upon the
Custodian by any applicable law or regulation if such above stated standard of
reasonable care was not part of this Contract. The Custodian shall be entitled
to rely on and may act upon advice of counsel for the Fund on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice, provided that such action is not in violation of applicable
federal or state laws or regulations, and is in good faith and without
negligence. Subject to the limitations set forth in Section 15 hereof, the
Custodian shall be kept indemnified by the Fund but only from the assets of the
Fund involved in the issue at hand and be without liability for any action
taken or thing done by it that is reasonably related to its responsibility to
carry out the terms and provisions of this Contract in accordance with the
above standards.
In order that the indemnification provisions contained in this Section 8
shall apply, however, it is understood that if in any case the Fund may be
asked to indemnify or save the Custodian harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the Custodian will use all reasonable care to
identify and notify the Fund promptly concerning any situation which presents
or appears likely to present the probability of such a claim for
indemnification. The Fund shall have the option to defend the Custodian against
any claim which may be the subject of this indemnification, and in the event
that the Fund so elects it will so notify the Custodian and thereupon the Fund
shall take over complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it shall seek
indemnification under this Section. The Custodian shall in no case confess any
claim or make any compromise in
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any case in which the Fund will be asked to indemnify the Custodian except with
the Fund's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian with
respect to redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Fund. If the Fund requires
the Custodian to take any action with respect to securities, which action
involves the payment of money or which action may, in the reasonable opinion of
the Custodian, result in the Custodian or its nominee assigned to the Fund
being liable for the payment of money or incurring liability of some other
form, the Custodian may request the Fund, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian in an
amount and form satisfactory to the Custodian. Subject to the limitations set
forth in Section 15 hereof, the Fund agrees to indemnify and hold harmless the
Custodian and its nominee from and against all taxes, charges, expenses,
assessments, claims and liabilities (including reasonable counsel fees)
(referred to herein as authorized charges) incurred or assessed against it or
its nominee in connection with the performance of this Contract, except such as
may arise from it or its nominee's own failure to act in accordance with the
standard of care set forth herein or any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation if such
above-stated standard of care were not part of this Contract. To secure any
authorized charges and any advances of cash or securities made by the Custodian
to or for the benefit of the Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for extraordinary or
emergency purposes during any business day, the Fund hereby grants to the
Custodian a security interest in and pledges to the Custodian securities held
for the Fund by the Custodian in an amount not to exceed 10 percent of the
Fund's gross assets, the specific securities to be designated in writing from
time to time by the Fund or the Fund's investment adviser. Should the Fund fail
to make such designation, or should it instruct the Custodian to make advances
exceeding the percentage amount set forth above and should the Custodian do so,
the Fund hereby agrees that the Custodian shall have a security interest in all
securities or other property purchased for the Fund with the advances by the
Custodian, which securities or property shall be deemed to be pledged to the
Custodian, and the written instructions of the Fund instructing their purchase
shall be considered the requisite description and designation of the property
so pledged for purposes of the requirements of the Uniform Commercial Code.
Should the Fund fail to repay promptly any authorized charges or advances of
cash or securities, subject to the provision of the second paragraph of this
Section 8 regarding indemnification, the Custodian shall be entitled to use
available cash and to dispose of pledged securities and property as is
necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid, to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof in the
absence of receipt of an initial
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certificate of the Secretary or an Assistant Secretary that the Board of the
Fund has approved the initial use of a particular Securities System as required
in each case by Rule 17f-4 under the 1940 Act; provided further, however, that
the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Certificate of
Incorporation, and further provided, that the Fund may at any time by action of
its Board (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a conservator or
receiver for the Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate regulatory agency
or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its reasonable costs, expenses and
disbursements incurred in connection with its performance of this agreement
through the date of termination.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder for the Fund and shall transfer to
separate accounts of the successor custodian all of the Fund's securities held
in a Securities System. If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote. In the
event that no written order designating a successor custodian or certified copy
of a vote of the Board shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the Custodian shall
have the right to deliver to a bank or trust company, which is a 'bank' as
defined in the 1940 Act, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of not
less than $100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract for the Fund and to transfer to
separate accounts of such successor custodian all of the Fund's securities held
in any Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
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11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the Certificate of Incorporation. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment
of this Contract.
12. California Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of California.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Fund at City National
Center, 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx, 00000, or to the
Custodian at City National Center, 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxxx, 00000, or to such other address as the Fund or the Custodian may
hereafter specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more counterparts,
each which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of liability
as set forth in paragraph 9 of the Certificate of Incorporation and agrees that
the obligations and liabilities assumed by the Fund pursuant to this Contract,
including, without limitation, any obligation or liability to indemnify the
Custodian pursuant to Section 8 hereof, shall be limited in any case to the
Fund and its assets and that the Custodian shall not seek satisfaction of any
such obligation from the shareholders of the Fund, from its shareholders, or
from the Directors, Officers, employees or agents of the Fund, or any of them.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 11th day of April, 2000.
ATTEST: CN LOAN FUND, INC.
/s/ Xxxxxxx Xxxxx /s/ Xxxx X. Xxxx
----------------- -----------------
Assistant Secretary Assistant CFO
ATTEST: CITY NATIONAL BANK
/s/ Xxxxxxx Xxxxx /s/ Xxxx X. Xxxx
----------------- ----------------
Senior Trust Counsel Executive Vice President
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Custodian Contract
Schedule A
For its services under the Custodian Contract, the Custodian will receive
a fee as follows:
For Custody Services
0.003% per year for the first $25,000,000 of securities and 0.0015% per year
for securities held in excess of $25,000,000. There is no additional fee for
custody services related to grantor trust certificates and loans and loan
participation interests serviced by City National Bank.
For Recordkeeping Services
There is no separate charge for recordkeeping services.
All fees are to be accrued daily and paid monthly.
