1
AGREEMENT dated December 31, 1996 between FIDUCIARY TRUST COMPANY
INTERNATIONAL ("Bank") and WARBURG, XXXXXX HEALTH SCIENCES FUND, INC. ("Fund")
1. Custody Account. The Bank agrees to establish and maintain (a) a
custody account in the name of the Fund ("Custody Account") for any and all
stocks, shares, bonds, debentures, notes, mortgages or other obligations for the
payment of money and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the same or evidencing
or representing any other rights or interests therein and other similar property
(hereinafter called "Securities") from time to time received by the Bank or its
subcustodians (as defined in the last sentence of Section 3) for the account of
the Fund, and (b) a deposit account in the name of the Fund ("Deposit Account")
for any and all cash in any currency received by the Bank or its subcustodians
for the account of the Fund, which cash shall not be subject to withdrawal by
draft or check.
2. Maintenance of Securities. Securities in the Custody Account shall
be held in the country or other jurisdiction as shall be specified from time to
time in Instructions (as defined
2
in Section 9 hereof), provided that such country or other jurisdiction shall be
one in which the principal trading market for such Securities is located or the
country or other jurisdiction in which such Securities are to be presented for
payment or are acquired for the Custody Account and cash in the Deposit Account
shall be credited to an account in such amounts and in the country or other
jurisdiction as shall be specified from time to time in Instructions, provided
that such country or other jurisdiction shall be one in which such cash is the
legal currency for the payment of public or private debts.
3. Eligible Subcustodians. The Board of the Fund authorizes the Bank to
hold the Securities in the Custody Account and the cash in the Deposit Account
in custody and deposit accounts, respectively, which have been established by
the Bank with (a) a securities system, (b) one of the Bank's branches, a branch
of a qualified U.S. bank, an eligible foreign custodian or an eligible foreign
securities depository and (c) a subcustodian of an eligible foreign custodian
that itself is an eligible foreign custodian or an eligible foreign securities
depository with which that subcustodian has entered into an agreement for the
custody of Fund assets; provided, however, that the Board of the Fund has
approved the use of the securities system and the Bank's or its subcustodian's
contract with such eligible foreign custodian or eligible
3
foreign securities depository by resolution, and Instructions to such effect
have been provided to the Bank. For purposes of this Agreement, "qualified U.S.
bank", "eligible foreign custodian" and "eligible foreign securities depository"
shall have the meanings provided in Rule 17f-5 (or any successor thereto) under
the Investment Company Act of 1940 as interpreted by the staff of the Securities
and Exchange Commission and a "securities system" shall mean a clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities depository, or a
book-entry system authorized by the U.S. Department of the Treasury and certain
federal agencies.
Hereinafter the term "subcustodian" will refer to (a) any securities system, (b)
any branch of a qualified U.S. bank, any eligible foreign custodian or any
eligible foreign securities depository with which the Bank has entered into an
agreement of the type contemplated hereunder regarding Securities and/or cash
held in or to be acquired for the Custody Account or the Deposit Account, and
(c) any subcustodian of an eligible foreign custodian with which the eligible
foreign custodian has entered into an agreement for the holding of Fund assets
or an eligible foreign securities depository in which the subcustodian
participates.
4
4. Use of Subcustodian. With respect to Securities and other assets
which are maintained by the Bank in the physical custody of a subcustodian
pursuant to Section 3 (as used in this Section 4, the term "Securities" means
such Securities and other assets):
(a) The Bank will identify on its books as belonging to the Fund any
Securities held by such subcustodian.
(b) In the event that a subcustodian permits any of the Securities
placed in its care to be held in an eligible foreign securities depository, such
subcustodian will be required by its agreement with the Bank to identify on its
books such Securities as being held for the account of the Bank as a custodian
for its customers.
(c) Any Securities in the Custody Account held by a subcustodian of the
Bank will be subject only to the instructions of the Bank or its agents, and any
Securities held in an eligible foreign securities depository for the account of
a subcustodian will be subject only to the instructions of such subcustodian.
5
(d) Securities will be deposited by the Bank only in an account with a
subcustodian which includes exclusively the assets held by the Bank for its
customers, and the Bank will cause such account to be designated by such
subcustodian as a special custody account for the exclusive benefit of customers
of the Bank.
(e) Except as otherwise provided in subsection 4 (k), any agreement the
Bank shall enter into with a subcustodian with respect to the holding of
Securities shall require that (i) the subcustodian shall exercise reasonable
care in the performance of its duties and indemnify, and hold harmless, the Bank
and the Fund from and against any loss, damage, cost, expense, liability or
claim arising out of or in connection with the institution's negligent or
improper performance or nonperformance of such obligation; (ii) the Securities
are not subject to any right, charge, security interest, lien or claim of any
kind in favor of such subcustodian or its creditors or agents except a claim of
payment for their safe custody or administration; (iii) beneficial ownership of
such Securities is freely transferable without the payment of money or value
other than for safe custody or administration; provided, however, that the
foregoing shall not apply to the extent that any of the above-mentioned rights,
charges, etc. result from any compensation or other expenses arising with
respect to the safekeeping of Securities pursuant to such agreement or from any
arrangements made by the Fund with any such subcustodian;
6
(iv) in the event that a subcustodian permits any of the Securities placed in
its care to be held in an eligible foreign securities depository, such
subcustodian will be required by its agreement with the Bank to identify on its
books such Securities as being held for the account of the Bank as a custodian
for its customers; (v) officers or auditors employed by or other representatives
of the Bank, including to the extent permitted under applicable law, the
independent public accountants for the Fund, will be given access to the books
and records of the foreign banking institution relating to its actions under its
agreement with the Bank; (vi) any Securities in the Custody Account held by a
subcustodian of the Bank will be subject only to the instructions of the Bank or
its agents, and any Securities held in an eligible foreign securities depository
for the account of a subcustodian will be subject only to the instructions of
such subcustodian; and (vii) such foreign banking institution shall notify the
Bank in the event that it ceases to qualify as either a branch of a "qualified
U.S. bank" or an "eligible foreign custodian", as such terms are defined in Rule
17f-5(c), as amended (or any successor thereto).
(f) The Bank shall allow independent public accountants of the Fund
such reasonable access to the records of the Bank relating to the Securities
held in the Custody Account as required by such accountants in connection with
their examination of the books and records pertaining to the affairs of the
Fund. The Bank shall, subject to restrictions under applicable
7
law, also obtain from any subcustodian with which the Bank maintains the
physical possession of any Securities in the Custody Account or cash in the
Deposit Account an undertaking to permit officers and independent public
accountants of the Fund such reasonable access to the records of such
subcustodian as may be required in connection with their examination of the
books and records pertaining to the affairs of the Fund. The Bank shall furnish
to the Fund such reports (or portions thereof) of the Bank's external audits as
relate directly to the Bank's system of internal accounting controls applicable
to the Bank's duties under this Agreement. The Bank shall use its best efforts
to obtain and furnish the Fund with such similar reports as the Fund may
reasonably request with respect to each eligible foreign custodian and eligible
foreign securities depository holding Securities or cash of the Fund.
(g) The Bank will supply to the Fund at least monthly a statement in
respect to any cash in the Deposit Account or Securities in the Custody Account
held by a subcustodian, including an identification of the entity having
possession of the cash or Securities, and the Bank will send to the Fund an
advice or notification of any transfers of cash or Securities to or from the
Custody Account, indicating, as to Securities acquired for the Fund, the
identity of the entity having physical possession of such Securities. In the
absence of written notice to the Bank by the Fund of exceptions or objections to
any such statement within sixty (60) days of the
8
Fund's receipt of such statement, or within sixty (60) days after the date that
a material defect is reasonably discoverable, the Fund shall be deemed to have
approved such statement, and the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters and things set
forth in such statement as though such statement had been settled by the decree
of a court of competent jurisdiction in an action in which the Fund and all
persons having any equity interest in the Fund were parties.
(h) The Bank shall furnish annually to the Fund information concerning
each subcustodian employed by the Bank. Such information shall be similar in
kind and scope to that furnished to the Fund in connection with the initial
approval of this Agreement. In addition, the Bank will provide the Fund with
such information as the Fund shall reasonably request in order to enable the
Fund to comply with Rule 17f-5 (or any successor thereto) under the 1940 Act. In
addition, the Bank will promptly inform the Fund in writing in the event that
the Bank learns of a material adverse change in the condition, financial or
otherwise, of a subcustodian or any loss of the assets of the Fund, or in the
case of any foreign subcustodian not the subject of an exemptive order from the
Securities and Exchange Commission modifying the shareholder equity requirement
under Rule 17f-5, learns that there appears to be a substantial likelihood that
a foreign subcustodian's shareholders' equity will decline below $200 million or
that its shareholders' equity has declined below $200
9
million (in each case in terms of U.S. dollars or the local currency equivalent
thereof and computed in accordance with generally accepted U.S. accounting
principles). In addition, the Bank will promptly inform the Fund in writing in
the event that the Bank learns of a material adverse change in the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the Fund is invested.
(i) Except as the Bank may otherwise inform the Fund in writing from
time-to-time, the Bank hereby warrants to the Fund that in the Bank's opinion,
after due inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank, each eligible foreign custodian
and each eligible foreign securities depository holding cash or Securities of
the Fund pursuant to this Agreement afford protection for such cash or
Securities at least equal to that afforded by the Bank's established procedures
with respect to similar securities held by the Bank (and its securities
depositories) in New York.
(j) The Bank hereby warrants to the Fund that, as of the date of this
Agreement, the Bank is maintaining a Bankers Blanket Bond in a commercially
reasonable amount in light of its duties and liabilities hereunder and to its
other customers, and the Bank hereby agrees to notify the Fund in the event its
Bankers Blanket Bond is cancelled or otherwise lapses.
10
(k) The Bank shall exercise its best efforts to cause all of its
existing subcustodian agreements to conform to the requirements of subsection
4(e) as soon as reasonably possible. The requirements of subsection 4(e) shall
not apply to any subcustodian that is an eligible foreign securities depository
or a securities system as defined under Section 3. Notwithstanding anything to
the contrary in subsection 4(e), the Fund may authorize the Bank in writing to
maintain Fund assets with subcustodians whose agreements do not conform fully to
subsection 4(e), upon receipt of (i) the applicable subcustodian agreement
(including all amendments thereto) and (ii) a written explanation by the Bank
covering how and why the agreements do not conform to subsection 4(e).
5. Deposit Account Payments. Subject to the provisions of Section 7,
the Bank shall make, or cause its subcustodians to make, payments of cash
credited to the Deposit Account only: (a) in connection with the purchase of
Securities for the Fund and the delivery of such securities to, or the crediting
of such Securities to, or the crediting of such Securities to the account of,
the Bank or its subcustodian, each such payment to be made at prices as
confirmed by Instructions;
11
(b) for the purchase or redemption of shares of the capital stock of
the Fund and the delivery to, or crediting to the account of, the Bank or is
subcustodian of such shares to be so purchased or redeemed;
(c) for the payment for the account of the Fund of dividends, interest,
taxes, management or supervisory fees, capital distributions or operating
expenses;
(d) for the payments to be made in connection with the conversion,
exchange or surrender of Securities held in the Custody Account;
(e) for other proper corporate purposes of the Fund; or
(f) upon the termination of the Custody Agreement as hereinafter set
forth.
All payments of cash for a purpose permitted by subsection (a), (b), (c) or (d)
of this Section 5 will be made only upon receipt by the Bank of Instructions
which shall specify the purpose for which the payment is to be made. In the case
of any payment to be made for the purpose permitted by subsection (e) of the
Section 5, the Bank must first receive a certified copy of a
12
resolution of the Board of the Fund adequately describing such payment,
declaring such purpose to be a proper corporate purpose, and naming the person
or persons to whom such payment is to be made. Any payment pursuant to
subsection (f) of this Section 5 will be made in accordance with Section 22.
In the event that any payment made under this Section 5 exceeds the
funds available in the Deposit Account, the Bank may, in its discretion, advance
the Fund an amount equal to such excess and such advance shall be deemed a loan
from the Bank to the Fund, payable on demand, bearing interest at the rate of
interest customarily charged by the Bank on similar loans.
If the Bank causes the Deposit Account to be credited on the payable
date for interest, dividends or redemptions, the Fund will promptly return to
the Bank any such amount or property so credited upon oral or written
notification that neither the Bank nor its subcustodian can collect such amount
or property in the ordinary course of business. The Bank or its subcustodian, as
the case may be, shall have no duty or obligation to institute legal
proceedings, file a claim or proof of claim in any insolvency proceeding or take
any other action with respect to the collection of such amount or property
beyond its ordinary collection
13
procedures, which procedures shall be comparable to those of other custodians of
mutual fund assets.
6. Custody Account Transactions. Subject to the provisions of Section
7, Securities in the Custody Account will be transferred, exchanged or delivered
by the Bank or its subcustodians only:
(a) upon sale of such Securities for the Fund and receipt by the Bank
or its subcustodian only of payment therefor, each such payment to be in the
amount confirmed by Instructions from Authorized Persons;
(b) when such Securities are called, redeemed or retired, or otherwise
become payable;
(c) in exchange for or upon conversion into other Securities alone or
other Securities and cash pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to their terms into
other Securities;
14
(e) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
(f) for the purpose of exchanging interim receipts or temporary
Securities for definitive Securities;
(g) for the purpose of redeeming in kind shares of the capital stock of
the Fund against delivery to the Bank or its subcustodian of such shares to be
so redeemed;
(h) for other proper corporate purposes of the Fund; or
(i) upon the termination of this Custody Agreement as hereinafter set
forth.
All transfers, exchanges or deliveries of Securities in the Custody Account for
a purpose permitted by either subsection (a), (b), (c), (d), (e), or (f) of this
Section 6 will be made, except as provided in Section 8, only upon receipt by
the Bank of Instructions which shall specify the purpose of the transfer,
exchange or delivery to be made. In the case of any transfer or delivery to be
made for the purpose permitted by subsection (g) of this Section 6, the Bank
15
must first receive Instructions from Authorized Persons specifying the shares
held by the Bank or its subcustodian to be so transferred or delivered and
naming the person or persons to whom transfers or delivery of such shares shall
be made. In the case of any transfer, exchange or delivery to be made for the
purpose permitted by subsection (h) of this Section 6, the Bank must first
receive a certified copy of a resolution of the Board of the Fund adequately
describing such transfer. exchange or delivery, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom delivery of
such securities shall be made. Any transfer or delivery pursuant to subsection
(i) of this Section 6 will be made in accordance with Section 22.
7. Custody Account Procedures. With respect to any transaction
involving Securities held in or to be acquired for the Custody Account, the Bank
shall cause the Deposit Account to be credited on the contractual settlement
date with the proceeds of any sale or exchange of Securities from the Custody
Account and to be debited on the contractual settlement date for the cost of
Securities purchased or acquired for the Custody Account. The Bank may reverse
any such credit or debit if the transaction with respect to which such credit or
debit was made fails to settle within a reasonable period, determined by the
Bank in its discretion, after the
16
contractual settlement date, except, that if any Securities delivered pursuant
to this Section 7 are returned by the recipient thereof, the Bank may cause any
such credits and debits to be reversed at any time.
Notwithstanding the preceding paragraph, settlement and payment for
Securities received for, and delivery of Securities out of, the Custody Account
may be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering Securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such Securities from such purchaser or dealer;
provided that such customary or established securities trading or securities
practices and procedures are generally accepted by "institutional investors" in
the jurisdiction or market where the transaction occurs.
For purposes of this Agreement, "Institutional Investors" means U.S.
registered investment companies or major, U.S. -based commercial banks,
insurance companies, pension funds or commercial banks, or substantially similar
financial institutions which, as part of their ordinary business operations,
purchase or sell securities and make use of non-U.S. custodial services. The
Bank agrees to provide the Fund a list showing those jurisdictions where the
17
customary settlement practice is not delivery versus payment, which shall be
kept current by the Bank.
In any and every case where payment for purchase of Securities for the
Custody Account is made by the Bank in advance of receipt of the Securities
purchased in absence of proper Instructions from the Fund on behalf of such
Custody Account to so pay in advance, the Bank shall be absolutely liable to the
Fund for the non-receipt of such Securities purchased except to the extent that
the Bank acted otherwise in accordance with this section 7, in which case the
Bank will be subject to the standard of care set forth in Section 12 hereof. 8.
Actions of the Bank. Until the Bank receives Instructions from Authorized
Persons to the contrary, the Bank will, or will instruct its subcustodian, to:
(a) present for payment any Securities in the Custody Account which are
called, redeemed or retired or otherwise become payable and all coupons and
other income items which call for payment upon presentation to the extent that
the Bank or subcustodian is aware of such opportunities for payment, and hold
cash received upon presentation of such Securities in accordance with the
provision of Sections 2, 3 and 4 of this Agreement;
18
(b) in respect of Securities in the Custody Account, execute in the
name of the Fund such ownership, tax reclamation and other certificates as may
be required to obtain payments in respect thereof;
(c) exchange interim receipts or temporary Securities in the Custody
Account for definitive Securities;
(d) in respect of trades reported on the Fund's behalf through
Depository Trust Company ("DTC"), accept instruction from DTC (whether in a DTC
report or otherwise) as though they were given by an Authorized Person;
(e) convert monies received with respect to Securities of foreign
issuers into United States dollars or any other currency necessary to effect any
transaction involving the Securities whenever it is practicable to do so through
customary banking channels, using any method or agency available, including, but
not limited to, the facilities of the Bank, its subsidiaries, affiliates or
subcustodians, which shall be entitled to receive compensation for such
services; and
19
(f) appoint brokers and dealers for any transaction involving the
Securities in the Custody Account from among (i) affiliates of the Bank (in
accordance with Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a-2-2(T) thereunder) or (ii) brokers and dealers included on Schedule _______
as in effect from time to time, which brokers and dealers shall be entitled to
receive compensation for their services. Any such compensation to an affiliate
of the Bank shall be at rates and on terms at least as favorable to the Fund as
are available from third party providers of such services.
9. Instructions. As used in the Agreement, the term "Instructions"
means instruction of (or on behalf of) the Fund received by the Bank, via
telephone, telex, TWX, facsimile transmission, bank wire or other teleprocess or
electronic instruction system acceptable to the Bank which the Bank believes in
good faith to have been given by two Authorized Persons or which are transmitted
with proper testing or authentication pursuant to terms and conditions which the
Bank may specify.
Any instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing signed by two Authorized Persons (which
confirmation may bear the
20
facsimile signature of such Persons), but the Fund will hold the Bank harmless
for any failure on the part of the Fund or its agents to send such confirmation
in writing or the failure of such confirmation to conform to the telephone
instructions received. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until cancelled or superseded. If the
Bank requires test arrangements, authentication methods or other security
devices to be used with respect to Instructions, any Instructions thereafter
shall be given and processed in accordance with such terms and conditions for
the use of such arrangements, methods or devices as the Bank may put into effect
and modify from time to time. The Fund shall safeguard and shall cause its
agents, if applicable, to safeguard any testkeys, identification codes or other
security devices which the Bank shall make available to the Fund or its agents.
The Bank may electronically record any instructions given by telephone, and
other telephone discussions, with respect to the Custody Account.
10. Authorized Persons. As used in the Agreement, the term "Authorized
Person" means such officers or such agents of the Fund as have been designated
by a resolution of the Board of the Fund, a certified copy of which has been
provided to the Bank, to act on behalf of the Fund in the performance of any
acts which Authorized Persons may do under this
21
Agreement. Such persons shall continue to be Authorized Persons until such time
as the Bank receives Instructions from Authorized Persons that any such officer
or agent is no longer an Authorized Person.
11. Nominees. Securities in the Custody Account which are ordinarily
held in registered form may be registered in the name of the Bank's nominee or,
as to any Securities in the possession of an entity other than the Bank, in the
name of such entity's nominee. The Fund agrees to hold any such nominee harmless
from any liability as a holder of record of such Securities, but not if such
liability is a result of such nominee's negligence, willful misconduct, bad
faith or reckless disregard of its duties. The Bank may without notice to the
Fund cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Bank's nominee or held by one of
its subcustodians and registered in the name of such subcustodian's nominee. If
Securities are called for partial redemption by the issuer of such Security, the
Bank may allot, or cause to be allotted, the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to be
fair and equitable.
22
12. Standard of Care. The Bank shall be responsible for the performance
of only such duties as are set forth herein or contained in Instructions given
to the Bank by Authorized Persons (or those that in each case are reasonably
incidental to such duties) which are not contrary to the provisions of the
Agreement.
The Bank will use reasonable care and diligence in performing its
duties under this Agreement. The Bank shall be liable to the Fund for any loss
which shall occur as the result of a failure of a subcustodian or an eligible
foreign securities depository engaged by such subcustodian to exercise
reasonable care and diligence. In the event of any loss to the Fund by reason of
the failure of the Bank or its subcustodian or an eligible foreign securities
depository engaged by its subcustodian to utilize reasonable care and diligence,
the Bank shall be liable to the Fund to the extent of the Fund's damages to be
determined based on the market value of the property which is the subject of the
loss at the date of discovery of the loss and without reference to any special
circumstances or conditions.
The Bank shall indemnify the Fund and its officers, directors,
trustees, employees, investment manager or adviser or agents (each an
"Indemnified Party") for all losses, damages,
23
costs and expenses resulting from the failure of the Bank, its subcustodians or
eligible foreign depositories or agents to exercise reasonable care and
diligence (which indemnification shall include reasonable attorneys' fees and
expenses). In the event of any loss of Fund property, the Bank shall be required
(i) to notify the Fund of the loss on the day of discovery by the Bank and (ii)
to promptly provide to the Fund a reasonably detailed written statement of the
relevant facts and circumstances. Upon discovery by the Bank of a loss to the
Fund of assets in custody with the Bank under this Agreement, the Bank will
immediately replace any Securities or reimburse any cash lost on the day of
discovery of such loss. The Bank shall be entitled to recover such amounts from
the Fund if, upon investigation, it reasonably establishes that the standard of
care applicable to the Bank, its subcustodians or eligible foreign custodian, as
set forth in the Agreement, has been met. The Bank shall be indemnified (to the
extent of assets in the Fund) by, and shall be without liability to, the Fund
for any action authorized by this Agreement taken or omitted by the Bank in good
faith without negligence (which indemnification shall include reasonable
attorneys' fees and expenses).
The Bank shall be entitled to rely, and may act, on the prior, written
advice of counsel experienced in the pertinent area of the law (who may be
counsel for the Fund) on all matters and shall be without liability for any
action reasonably taken or omitted in good faith pursuant
24
to such advice. The Bank shall maintain insurance in a commercially reasonable
amount to cover its obligations with respect to the Securities in the Custody
Accounts and Cash in the Deposit Account. The Bank shall provide to the Fund, on
an annual basis, a report stating whether any events have occurred which would
render the arrangements hereunder to cease to be in compliance with the rules of
the Securities and Exchange Commission governing such arrangements and
describing any such event.
Upon the occurrence of any event which causes or may cause any losses
to the Fund, the Bank shall, and shall cause any applicable domestic or foreign
subcustodian to, use all commercially reasonable steps under the circumstances
to mitigate the effects of such event and to avoid continuing harm to the Fund.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Fund. The Bank shall have no liability for any loss occasioned by delay in the
actual receipt of notice by the Bank or by its subcustodian of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take action as provided in Section 8
hereof, other than losses arising from the negligence, willful misconduct, bad
faith or reckless
25
disregard of the duty of the Bank, its subcustodians or agents. The Bank shall
not be liable for any action taken in good faith upon Instruction or upon any
certified copy of any resolution and may rely on the genuineness of any such
documents which it may in good faith believe to be validly executed. The Bank
shall not be liable for any loss resulting from, or caused by, the direction of
the Fund to maintain custody of any Securities or cash in a foreign country
("country risk") including, but not limited to, losses resulting from
nationalization, expropriation, currency restriction, act of war or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation, or acts of God.
13. Compliance with Securities and Exchange Commission Rules and
Orders. The Bank agrees to comply with all laws, rules, regulations,
interpretations, or exemptive orders promulgated by or under the authority of
the Securities and Exchange Commission applicable to its activities hereunder,
but shall not be responsible for the Fund's compliance with its investment
objectives, policies or restrictions or laws, rules, regulations,
interpretations or exemptive orders governing the Fund's investment activities.
14. Corporate Action. The Bank or its subcustodian is to promptly
forward to
26
Provident National Bank ("Provident") (or any successor thereto appointed by the
Fund) such communications relative to the Securities in the Custody Account as
call for voting or the exercise of rights or other specific action (including
material relative to legal proceedings intended to be transmitted to security
holders). The Bank or its subcustodian will cause its nominee to execute and
deliver to Provident (or its successor) proxies relating to Securities in the
Custody Account registered in the name of such nominee but without indicating
the manner in which such proxies are to be voted. Proxies relating to bearer
Securities will be delivered in accordance with written instructions from
Authorized Persons. All other corporate action notifications where no action is
required shall be made available to the Fund and Provident as the Bank and the
Fund may agree in writing from time to time.
15. Communications Relating to Portfolio Securities. The Bank shall
transmit promptly to the Fund written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith) received by the Bank via its subcustodians from
issuers of the securities being held for the account of the Fund. With respect
to tender or exchange offers, the Bank shall transmit promptly to the Fund
written information so received by the Bank from issuers of the securities whose
tender or
27
exchange is sought or from the party (or his or its agents) making the tender or
exchange offer. With respect to instructions received by the Bank, the Bank
shall use its best efforts in the light of local conditions to take the
requested action.
16. Tax Law. The Bank shall use its best efforts and due care to
perform such steps typical for persons acting as global custodian for
Institutional Investors as are required to collect any tax refund, to ascertain
the appropriate rate of tax withholding and to provide documents as may be
required to enable the Fund to receive appropriate tax treatment under
applicable tax laws and any applicable treaty provisions.
17. Segregated Account. The Bank shall upon receipt of Instructions
from the Fund establish and maintain, or cause the applicable subcustodian to
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 (i) in accordance with the provisions of any agreement among the
Fund, the Bank (or such subcustodian) and a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act), relating to
compliance
28
with the rules of The Options Clearing Corporation or of any registered national
securities exchange (or the Commodity Futures Trading Commission and/or any
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Fund, (ii)
for purposes of segregating cash and/or securities in connection with (a)
options purchased, sold or written by the Fund, (b) commodity futures contracts
or options thereon purchased, sold or written by the Fund or (c) other
transactions requiring segregation as described in the Fund's registration
statement as in effect from time to time, (iii) for the purposes of compliance
by the Fund with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate purposes, but only, in
the case of this clause (iv), upon receipt of, in addition to Instructions from
the Fund, a certified resolution setting forth the purpose of purposes of such
segregated account and declaring such purposes to be proper corporate purposes.
18. Collection of Income. The Bank (or its subcustodian) shall use its
best efforts in accordance with market practice generally accepted by
Institutional Investors to collect all
29
income and other payments in due course with respect to the securities held
hereunder to which the Fund shall be entitled and shall credit such income, as
collected, to the Fund. In the event that extraordinary measures are required to
collect such income, the Fund and the Bank shall consult as to such measures and
as to the compensation and expenses of the Bank attendant thereto and the Bank
shall have no obligation to take such extraordinary measures unless it so agrees
in writing.
19. Disaster Recovery. In the event of equipment failures beyond the
Bank's control, the Bank shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. The Bank shall enter into
and shall maintain in effect with appropriate parties one or more agreements
making reasonable provision for (i) periodic back-up of the computer files and
data with respect to the Fund and (ii) emergency use of electronic data
processing equipment to provide services under this Agreement.
20. Fees and Expenses. The Fund agrees to pay to the Bank from time to
time such compensation for its services pursuant to the Agreement as may be
mutually agreed upon in
30
writing from time to time. The Fund hereby agrees to hold the Bank harmless from
any liability or loss resulting from any registration fees, taxes or other
governmental charges, and any expenses related thereto, which may be imposed or
assessed with respect to the Custody Account (except such as are directly
attributable to income, franchise or similar taxes which may be imposed or
assessed against the Bank, its affiliates, subsidiaries, agents or nominees) and
also agrees to hold the Bank, its subcustodian, and their respective nominees
harmless from liability arising solely as a record holder of Securities in the
Custody Account unless the liability results from the negligence, willful
misconduct, bad faith or reckless disregard of duty by any of such parties. The
Bank shall have a lien on Securities in the Custody Account and on cash in the
Deposit Account for any amount owing to the Bank from time to time under this
Agreement and shall be authorized to charge any account of the Fund for such
items if not paid within a reasonable time after written notice to the Fund.
21. Effectiveness. This Agreement shall be effective on the date first
noted above. This Agreement supersedes and terminates, as of such date, all
prior contracts between the Fund and the Bank relating to the custody of the
assets of the Fund.
31
22. Termination. This Agreement may be terminated by the Fund by 60
days' written notice to the Bank and by the Bank on 180 days' written notice to
the Fund; in either case, sent by registered mail, provided that any termination
by the Fund shall be authorized by a resolution of the Board of the Fund, a
certified copy of which shall accompany such notice of termination, and provided
further, that such resolution shall specify the names of the persons to whom the
Bank shall deliver the Securities in the Custody Account and to whom the cash in
the Deposit Account shall be paid. If notice of termination is given by the
Bank, the Fund shall, within 120 days following the giving of such notice,
deliver to the Bank a certified copy of a resolution of its Board specifying the
names of the persons to whom the Bank shall deliver such Securities and cash to
the persons so specified, after deducting therefrom any amounts which the Bank
determines to be owed to it under Section 20. If within 120 days following the
giving of a notice of termination by the Bank, the Bank does not receive from
the Fund a certified copy of a resolution of Board specifying the names of the
persons to whom the Securities in the Deposit Account and the cash in the Cash
Account shall be paid, the Bank, at its election, may deliver such Securities
and pay such cash to a bank or trust company doing business in the State of New
York having an aggregate capital, surplus and undivided profits of not less than
$200 million to be held and disposed of pursuant to the provisions of the
32
Agreement, or may continue to hold such Securities and cash until a certified
copy of one or more resolutions as aforesaid is delivered to the Bank. The
obligations of the parties hereto regarding the use of reasonable care,
indemnities and payment of fees and expenses shall survive the termination of
this Agreement.
23. Notices. Other than Instructions pursuant to Section 9 hereof, any
notice or other communication from the Fund or its agents to the Bank is to be
sent to the office of the Bank at Xxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Global Custody Division, or such other address as may
hereafter be given to the Fund and any notice from the Bank to the Fund is to be
sent to the Fund (Attention: President) at the address appearing below, or as
the same may hereafter be changed on the Bank's records in accordance with
notice hereunder from the Fund. Notice may be given by hand delivery, overnight
delivery, telegram, cable, telex, facsimile sending device or first-class mail,
postage pre-paid. If notice is given by first-class mail, it shall be deemed to
have been given five days after it has been mailed. If notice is sent by hand
delivery, it shall be deemed to have been given on the day it is delivered. If
notice is given by telegram, cable, telex or facsimile sending device, it shall
be deemed to have been given immediately if confirmed in writing by overnight
delivery or hand
33
delivery.
24. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York without regard to the conflict of
law provisions thereof and shall not be assignable by any party, but shall bind
the respective successors and assigns of the Fund and the Bank.
25. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
26. Counterpart Execution. This Agreement may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same documents. All counterparts shall be construed together and shall
constitute one Agreement.
27. Massachusetts Business Trust. A copy of the Declaration of Trust of
the Fund is on file with the Secretary of the Commonwealth of Massachusetts. The
parties hereto acknowledge that this Agreement is not executed by the Fund on
behalf of the trustees of the
34
Fund as individuals and that the obligations of this Agreement are not binding
upon any of the trustees, officers, shareholders or partners of the Fund
individually, but are binding upon the assets and property of the Fund
individually. The parties agree that (i) no shareholder, trustee, officer or
partner of the Fund may be held personally liable or responsible for any
obligations of the Fund arising out of this Agreement and (ii) that the Bank
shall have no claim under this Agreement on the assets or property of any
portfolio or series of the Fund other than the assets or property of such Fund,
and that no portfolio or series of the Fund shall have the right of set off
against assets, property or obligations of the Bank owed to or held by any other
portfolio or series of the Fund.
Warburg, Xxxxxx Health Sciences Fund, Inc.
By: /s/ Xxxxxx X. Xxxxx
Title: Vice President and Secretary
Address for record: 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
35
FIDUCIARY TRUST COMPANY
INTERNATIONAL
By: /s/ Xxxxxx X. Xxxxxxx
Title: Senior Vice President
h:\ warburg.hsf
