HSBC Bank USA Precious Metals Depository Agreement
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DEPOSITORY AGREEMENT
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DEPOSITORY AGREEMENT, dated as of [April __, 2004] by and between
First Eagle Variable Funds, an investment company registered as such under the
Investment Company Act of 1940 as amended ("1940 Act") and organized as a
statutory trust under the laws of the State of Delaware (the "Depositor"), on
behalf of its sole series, the First Eagle Overseas Variable Fund, and HSBC Bank
USA, a state-chartered, Federal Reserve member bank organized under the laws of
the State of New York (the "Depository").
WHEREAS, Depository has provided Depositor's Board of Director with
materials fairly describing its financial position, experience with respect to
the safekeeping of precious metals, physical security measures, access
procedures and controls and similar factors relevant to its appointment
hereunder, collectively, ("Depositor Due Diligence Material ") and Depositor's
Board of Directors has reviewed and considered such materials.
NOW THEREFORE:
Section 1
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Appointment of Depository
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Section 1.1. The Depositor hereby appoints the Depository as custodian
of the metals described in each Safekeeping Advice (the "Precious Metals") which
the Depository will issue from time to time in accordance with Section 2.2
hereof during the term of this Agreement.
Section 1.2. The Depository hereby accepts appointment as such
custodian of the Precious Metals and agrees to perform its duties in respect
thereof pursuant to the provisions of this Agreement. In this regard, Depository
represents that it is, and will continue to be, a bank having the qualifications
required by section 17(f) of the 1940 Act to serve as a custodian to a
registered investment company.
Section 1.3 The Depository will provide Depositor's Board of
Directors with such updated and/or supplemented Depositor due diligence
materials as Depositor may reasonably request, such materials generally to be
provided quarterly.
Section 2
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Control, Receipt and Storage of the Precious Metals
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Section 2.1. Control over the Precious Metals shall be and shall remain
vested in the Depositor.
Section 2.2. Each delivery of Precious Metals to the Depository shall
be evidenced by a completed Safekeeping Advice, substantially in the form of
Exhibit A attached hereto; and delivery of the Precious Metals by the Depository
to the Depositor, or to a party designated by the Depositor pursuant to Section
VII hereof, shall be evidenced by a completed Safekeeping Withdrawal Advice
substantially in the form of Exhibit B attached hereto. Depository shall provide
promptly to Depositor copies of each such Advice or other transaction
statements.
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Section 2.3. The Depository shall receive, hold and keep the Precious
Metals in the Depository's custody at its premises located at 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx. and/or 000 Xxx Xxxx Xxxxx Xxxx, Xxxxxxx, Xxx Xxxx. The
Depository will not be responsible for the Precious Metals until they are
actually delivered to and received by the Depository at its premises.
Section 3
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Responsibilities of Depository
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Section 3.1. The Depository shall be responsible for the safekeeping of
the Precious Metals in the form and condition in which they are delivered to the
Depository while they are in the possession or under the control of the
Depository, at all times in accordance with reasonable industry practice
regarding the safekeeping of such materials. The Depository shall keep the
Precious Metals separately identified and segregated and shall xxxx in an
appropriate manner the Precious Metals held for the Depositor. The Depository
shall, at all times during its business hours, permit any person designated on
Schedule I ("Designated Persons Schedule") attached hereto or any other person
designated by the written request of the Depositor, including for this purpose,
authorized representatives of the Depositor's independent auditors
(collectively, "Designated Persons"), to have access to the Precious Metals for
the purpose of inspection and taking inventory thereof.
Section 3.2. The Depository shall send to the Depositor monthly (i) a
statement summarizing each receipt and each delivery of the Precious Metals held
by it for the Depositor during such period, and (ii) a detailed statement of the
Precious Metals held by the Depository pursuant to this Agreement during the
period covered by such statement certified by an officer of the Depository.
Unless the Depositor objects by written notice to the Depository which is
received by the Depository within 10 business days after such statement is sent
to the Depositor, such statement shall be conclusive and binding on the
Depositor. The books, accounts and records of the Depository pertaining to its
actions pursuant to this Agreement shall be kept open to inspection and audit
during reasonable business hours by Designated Persons.
Section 3.3. The Depository shall, as warehouseman, acknowledge receipt
from the Depositor of the Precious Metals and may, at its option, record certain
specifications indicated on the Precious Metals Other than in connection with
the duties undertaken at the Depositor's request pursuant to section 3.6 hereof,
the Depository is not responsible for the authenticity of markings on or for the
weight, fineness or contents of any of the Precious Metals, packages or sealed
containers delivered to Depository by the Depositor.
Section 3.4. Delivery of the Precious Metals to the Depository will be
at the Depositor's expense. The Depositor shall pay or reimburse the Depository
from time to time for any taxes or other governmental charges payable, and
actually paid, by the Depository upon storage or transfers of the Precious
Metals made hereunder, and for all other usual, necessary and proper
disbursements and expenses made or incurred by the Depository in its performance
of this Agreement.
Section 3.5. The Depositor agrees to indemnify and hold harmless the
Depository from and against any loss, damage, taxes, charges, expenses,
assessments, claims or liabilities, including reasonable counsel fees, incurred
by it as a result of its performance of this Agreement, except such as
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may arise from its own gross negligence, willful default or misconduct or
reckless disregard of the duties and obligations hereunder.
Section 3.6. Upon the request of the Depositor and at the Depositors'
expense, the Depository will undertake to do the following:
3.6(a) Weigh and incise bars not marked to industry standard and
produce authorized bar and weight listings for corresponding
material.
3.6(b) Assay sample bars from a Depositor's inventory by an approved
assayer or transport such bars to a refinery in order to
verify content.
3.6(c) Segregate a client's Precious Metals according to collateral
requirements and confirm such action with a lending bank or
financial institution. Timely release of the Precious Metals
will be effected once the loan agreement is completed.
Section 3.7. Neither Depository nor Depositor shall be responsible for
delays or failures in performance resulting from acts beyond the control of such
party, provided that any party disclaiming responsibility under this section 3.7
shall have taken reasonable measures designed to minimize the impact of the
particular act. Such acts shall include but not be limited to acts such as God,
strikes, lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire, communication line failures, power failures,
earthquakes or other disasters.
Section 4
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Delivery of Precious Metals by Depositor
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Section 4.1. From time to time during the term of this Agreement and in
accordance with instructions of the Depositor and at the Depositor's expense,
the Depository will deliver, or cause to be delivered, Precious Metals to the
persons named and by the method of shipment or delivery set forth in such
instructions subject to the following terms:
4.1(a) Upon Depositor's request for a withdrawal, Depository will
assign the earliest available date to effect such withdrawal,
which date shall be no later than five business days from the
date of request or a later date agreed to by the parties.
4.1(b) Requests for withdrawals of small shipments (10 items or less)
may be made by telephone followed by written request. All
other preliminary requests must be made in writing, containing
the information stipulated in Section 4.1 (c) hereof and
received by the Depository signed by a duly authorized
Designated Person, or by tested telex or facsimile
transmission.
If a withdrawal involves receipted material, receipts must be
properly endorsed and delivered to the Depository at least one
full day prior to the shipment date for small shipments, and
at least five full days prior to shipment date for shipments
involving more than 100 items (100 receipts for COMEX Silver).
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4.1(c) The following information will be required for releasing
materials:
a. Bar list, receipt list or proper identification of
material
x. Xxxxx weight of each item (if applicable)
c. Total number of items
d. Total gross weight of shipment
e. Date agreed to by Depository for shipment
f. Carrier to be used (if applicable)
g. Any special packaging instructions
4.1(d) Depository will prepare and deliver material to the United
States Post Office for delivery through the U.S. Postal System
pursuant to the rules and regulations thereof.
Fees for this service will be specified on Schedule 11 hereto
(the "Fee Schedule").
4.1(e) Given one full business day's notification, Depository will
pick up or deliver any reasonably sized shipment between our
vault and any point within the borough of Manhattan via
armored carrier. Fees for this service are available upon
request.
Section 4.2. The Depository will prepare and complete all shipping
documents and, upon delivery of the Precious Metals, send a complete set of such
documents to the Depositor.
4.2(a) Upon notification of an incoming overseas shipment by the
client, Depository will arrange for customs clearance, entry
fees and bonding, and insured transportation from Port of
Entry to Depository's vault. Charges for the Customs Entry
Service are available upon request.
4.2(b) The rates quoted for Customs Entry Service are for arrivals
between the hours of 8 AM and 6 PM. Shipments arriving between
the hours of 6 PM and 8 AM will be subject to premiums and are
available upon request.
Section 5
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Fees
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Section 5.1. The Depository's fees for performing services pursuant to
this Agreement will be in accordance with the attached Fee Schedule and shall be
due and payable upon receipt of invoice..
Section 5.2. Rates for storage and withdrawal of commodities traded on
exchange receipts for which Depository is a licensed depository cannot be
offered at a discount. These rates are on file with each licensing exchange.
Depository has the right to change any or all of these rates by giving 90 days
prior notice to the appropriate exchange. In the event of a rate change, the
exchange will inform its clearing members of the new rates and effective dates.
Section 5.3. Withdrawal charges quoted are for preparation and release
of shipments only. Charges for pallets, strapping, special packing or other
materials required will be added to the fees in the basic agreement.
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Section 5.4. Depositor giving authorization to transfer funds from a
demand deposit account will have its account debited within three business days
of invoice date.
Section 5.5. In the event that payment has not been received within
thirty (30) days of the invoice date, Depository reserves the right to review
the credit status of Depositor and to institute an interest charge on any
outstanding balance from the billing date at a rate of 1.5% per month 18% per
year).
Section 5.6 Depositor must notify Depository of any billing errors
or disputed charges within sixty (60) days of the invoice date or will thereby
assume responsibility for charges including interest until notification of error
is given.
Section 5.7 The Depositor hereby agrees that Depository shall have
a lien upon the Precious Metals held for Depositor in an amount equal to any
fees owed to Depository by Depositor, provided, however, that Depository shall
not permit any creditor of Depository to establish or maintain any security
interest, lien or other claim upon the Precious Metals held for the Depositor.
Section 6
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Termination
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Section 6.1. This Agreement may be terminated by the Depositor by
giving written notice to the Depository specifying the date of such termination,
which shall be not less than thirty days after the date of such notice, or by
the Depository by giving written notice to the Depositor specifying the date of
such termination, which shall not be less than ninety days after the date of
such notice. In the event notice of termination is given by the Depositor, the
Depositor shall designate therein a successor depository, and the Depository
shall follow the directions of the Depositor to deliver the Precious Metals to
such successor depository at Depositor's expense. In the event such notice is
given by the Depository the Depositor shall, on or before the termination date,
deliver to the Depository a designation of a successor depository and
instructions to deliver the Precious Metals to such successor depository at
Depository's expense.
Section 6.2. Upon the date set forth in any notice of termination given
pursuant to Section 6.1 above, this Agreement shall terminate. On such date, the
Depository shall deliver directly to the successor depository (or, if there is
no successor depository, the Depositor) all of the Precious Metals held by it as
Depository, and the Depositor shall pay Depository all fees, expenses and other
amounts to which it is entitled pursuant to the terms of this Agreement.
Section 6.3. In the event that the Depository shall become incapable of
performing as custodian pursuant hereto, or shall be dissolved, adjudged a
bankrupt or insolvent or a trustee, receiver or conservator of the Depository or
its property shall be appointed or an application for any of the foregoing is
files, or if control of the Depository or its officers or directors be taken
over by any governmental or other public authority or officer, then this
Agreement shall automatically terminate and the Depository or any trustee,
receiver or conservator shall deliver to the Depositor or a successor depository
all of the Precious Metals held by the Depository pursuant hereto upon payment
by the Depositor of all fees,
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expenses and other amounts as to which the Depository is entitled pursuant to
the terms of this Agreement.
Section 6.4. A successor depository resulting from the provisions of
Section 6. 1, 6.2 or 6.3 shall be vested with all the powers, duties and
obligations of its predecessor under this Agreement and any amendments thereof,
and shall succeed to all exemptions and privileges of its predecessor under this
Agreement and any amendments thereof.
Section 6.5. The termination of this Agreement shall not affect the
obligations of either party to the other party which arise or accrue prior to
the date of termination hereof.
Section 7
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Designated Persons
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The following entitled Designated Persons must meet the following
conditions:
i. List must be on company/personal letterhead.
ii. Designated Persons' names must be typed or printed, then signed by
the individuals.
iii. Instructions must be included (i.e. multiple signatures required
for withdrawals).
iv. Authorization letter must be signed by an officer of the
Depositor.
Changes in the list of Designated Persons must be submitted to
Depository immediately.
Section 7.1. Depositor must provide a listing of individuals authorized
to transact business involving materials held by Depository. This list shall be
attached to this Agreement as Schedule 1.
Section 7.2. The Depository shall be entitled to rely upon any notice
or other instrument in writing received by the Depository from Designated
Persons and reasonably believed by the Depository in good faith to be genuine.
Section 7.3. Depositor will hold harmless and indemnify Depository for
any transaction made by Depository upon the instructions whether written or by
facsimile transmission of an individual not properly removed by Depositor from
the Designated Persons list.
Section 8
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Confidential
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Section 8.1. Depositor agrees that it will not divulge to third
parties, without the written consent of Depository or as maybe required by law,
any confidential information of Depository attained from or through same in
connection with the performance of this Agreement.
Section 8.2 In all cases, Depository maintains a degree of
confidentiality with respect to client records and transactions commensurate
with exchange requirements and with the standards applicable to Depository's own
confidential information.
Section 8.3 It is further agreed that neither party will use the name
of the other or any affiliate
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thereof in its advertising or in its public relations with third parties without
prior written consent of the party so referenced: provided, however, that
Depository acknowledges that disclosure obligations applicable to registered
investment companies will require public filing of this contract with the
Securities and Exchange Commission and identification of Depository as custodian
to the First Eagle Overseas Variable Fund in Depositor's publicly available
registration statement.
Section 9
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Miscellaneous
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Section 9.1. Any notice, demand or instruction authorized or required
by, or given pursuant to, this Agreement shall be in writing and be deemed given
if sent by first class airmail or by tested telex or delivered to a party at its
principal place of business set forth on Schedule III hereto.
Section 9.2. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with the same
formality as this Agreement.
Section 9.3. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective successors and assigns;
provided, however, that, except as provided herein, this Agreement shall not be
assignable by either party without the written consent of the other party.
Section 9.4. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Section 9.5. If any term or provision of this Agreement should be
declared invalid by a court of competent jurisdiction', the remaining terms and
provisions of this Agreement shall be unimpaired.
Section 9.6. This Agreement, together with all the Schedules and
Exhibits attached hereto, constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes in all respects all
prior proposals, negotiations, conversations, discussions, and agreements made
between the parties concerning the subject matter hereof.
Section 9.7 The parties acknowledge that First Eagle Overseas Variable
Fund is a separate investment portfolio of Depositor, as is permitted by the
1940 Act and Delaware law. All obligations of Depositor hereunder are limited to
such portfolio and any amount owed by Depositor hereunder shall be paid only
from the assets of such portfolio.
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IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be
executed as of the date first above written by their respective officers
thereunto duly authorized.
HSBC Bank USA
By: By:
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Name: Name:
Title: Title:
By: By:
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Name: Name:
Title: Title:
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