EX-99.B(8)(a)
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of January 19, 1989 by and between
FLAG INVESTORS TELEPHONE INCOME FUND, INC., a Maryland corporation (the "Fund"),
and PROVIDENT NATIONAL BANK, a national banking association ("Provident").
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to retain Provident to serve as the
Fund's custodian and Provident is willing to serve as the Fund's custodian;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Provident to act as
custodian of the portfolio securities, cash and other property belonging to the
Fund for the period and on the terms set forth in this Agreement. Provident
accepts such appointment and agrees to furnish the services herein set forth in
return for the compensation as provided in Paragraph 21 of this Agreement.
Provident agrees to comply with all relevant provisions of the 1940 Act and
applicable rules and regulations thereunder. The Fund may from time to time
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issue separate series, classes or classify and reclassify shares of such series
or class. Provident shall identify to each such series or class property
belonging to such series or class and in such reports, confirmations and notices
to the Fund called for under this Agreement shall identify the series or class
to which such report, confirmation or notice pertains.
2. Delivery of Documents. The Fund has furnished Provident
with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors
authorizing the appointment of Provident as custodian of the portfolio
securities, cash and other property belonging to the Fund and approving this
Agreement;
(b) Appendix A identifying and containing the
signatures of the Fund's officers and/or other persons authorized to issue Oral
Instructions and to sign Written Instructions, as hereinafter defined, on behalf
of the Fund;
(c) The Fund's Articles of Incorporation filed with
the Department of Assessments and Taxation of the State of Maryland on November
4, 1988 and all amendments thereto (such Articles of Incorporation, as presently
in effect and as they shall from time to time be amended, are herein called the
"Charter");
(d) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
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(e) The Investment Advisory Agreement between Flag
Investment Management Corp. (the "Advisor") and the Fund dated as of January 19,
1989 (the "Advisory Agreement");
(f) The Sub-Advisory Agreement between Alex. Xxxxx
Investment Management and the Fund dated as of January 19, 1989 (the
"Sub-Advisory Agreement");
(g) The Distribution Agreement between the Fund and
Alex. Xxxxx dated as of January 19, 1989 (the "Distribution Agreement");
(h) The Transfer Agency Agreement between Provident
Financial Processing Corporation (the "Transfer Agent") and the Fund dated as of
January 19, 1989 (the "Transfer Agency Agreement");
(i) The Administration and Accounting Services
Agreement between Provident Financial Processing Corporation and the Fund dated
as of January 19, 1989 (the "Accounting Services Agreement");
(j) The Fund's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as
filed with the Securities and Exchange Commission ("SEC") on October 21, 1983;
(k) The Fund's most recent Registration Statement on
Form N-1A under the Securities Act of 1933, as amended ("xxx 0000 Xxx") (File
No. 2-87336) and under the 1940 Act as filed with the SEC on November 18, 1988
relating to shares of the Fund's Common Stock, $.001 par value ("Shares"), and
all amendments thereto;
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(l) The Fund's most recent prospectus or prospectuses
relating to Shares (such prospectus or prospectuses, as presently in effect and
all amendments and supplements thereto are herein called the "Prospectus"); and
(m) Before the Fund engages in any transactions
regulated by the Commodity Futures Trading Commission ("CFTC"), a copy of either
(i) a filed notice of eligibility to claim the exclusion from the definition of
"commodity pool operator" contained in Section 2(a)(1)(A) of the Commodity
Exchange Act ("CEA") that is provided in Rule 4.5 under the CEA, together with
all supplements as are required by the CFTC, or (ii) a letter which has been
granted the Fund by the CFTC which states that the Fund will not be treated as a
"pool" as defined in Section 4.10(d) of the CFTC's General Regulations, or (iii)
a letter which has been granted the Fund by the CFTC which states that the CFTC
will not take any enforcement action if the Fund does not register as a
"commodity pool operator."
The Fund will furnish Provident from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement,
the term "Authorized Person" means any of the officers of the Fund and any other
person, whether or not any such person is an officer or employee of the Fund,
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duly authorized by the Board of Directors of the Fund to give Oral and Written
Instructions on behalf of the Fund and listed on the Certificate annexed hereto
as Appendix A or any amendment thereto as may be received by Provident from time
to time.
(b) "Book-Entry System". As used in this Agreement,
the term "Book-Entry System" means the Federal Reserve Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees and any book-entry system maintained by a
clearing agency registered with the SEC under Section 17A of the Securities
Exchange Act of 1934 (the "1934 Act").
(c) "Oral Instructions". As used in this Agreement,
the term "Oral Instructions" means oral instructions actually received by
Provident from an Authorized Person or from a person reasonably believed by
Provident to be an Authorized Person. The Fund agrees to deliver to Provident,
at the time and in the manner specified in Paragraph 8(b) of this Agreement,
Written Instructions confirming Oral Instructions.
(d) "Property". The term "Property", as used in this
Agreement, means:
(i) any and all securities and other
property which the Fund may from time to time deposit, or cause to be
deposited, with Provident or which Provident may from time to time hold
for the Fund;
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(ii) all income in respect of any of such
securities or other property;
(iii) all proceeds of the sale of any of
such securities or other property; and
(iv) all proceeds of the sale of securities
issued by the Fund, which are received by Provident from time to time
from or on behalf of the Fund.
(e) "Written Instructions". As used in this
Agreement, the term "Written Instructions" means written instructions delivered
by hand, mail, tested telegram, cable, telex or facsimile sending device, and
received by Provident and signed by an Authorized Person.
4. Delivery and Registration of the Property. The Fund will
deliver or cause to be delivered to Provident all securities and all moneys
owned by it, including cash received for the issuance of its Shares, at any time
during the period of this Agreement. Provident will not be responsible for such
securities and such moneys until actually received by it. All securities
delivered to Provident (other than in bearer form) shall be registered in the
name of the Fund or in the name of a nominee of the Fund or in the name of
Provident or in the name of any nominee of Provident (with or without indication
of fiduciary status), or in the name of any sub-custodian or any nominee of any
such sub-custodian appointed pursuant to Paragraph 6 hereof or shall be properly
endorsed and in form for transfer satisfactory to Provident.
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5. Receipt and Disbursement of Money.
(a) Provident shall open and maintain a separate
custodial account or accounts in the name of the Fund, subject only to draft or
order by Provident acting pursuant to the terms of this Agreement, 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. Provident shall make
payments of cash to, or for the account of, the Fund from such cash only (i) for
the purchase of securities for the Fund's portfolio as provided in Paragraph 13
hereof; (ii) upon receipt of Written Instructions, for the payment of interest,
dividends, taxes, administration, accounting, distribution, advisory or
sub-advisory fees or expenses which are to be borne by the Fund under the terms
of this Agreement, the Advisory Agreement, the Sub-Advisory Agreement, the
Accounting Services Agreement, the Transfer Agency Agreement and the
Distribution Agreement; (iii) upon receipt of Written Instructions, for payments
in connection with the conversion, exchange or surrender of securities owned or
subscribed to by the Fund and held by or to be delivered to Provident; (iv) to a
sub-custodian pursuant to Paragraph 6 hereof; (v) for the redemption of Fund
Shares; (vi) for payment of the amount of dividends received in respect of
securities sold short; or (vii) upon receipt of Written Instructions, for other
proper Fund purposes. No payment pursuant to (i) above shall be made unless
Provident has received a copy of the broker's or dealer's confirmation or the
payee's invoice, as appropriate.
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(b) Provident is hereby authorized to endorse and
collect all checks, drafts, negotiable instruments or other orders for the
payment of money received as custodian for the account of the Fund.
6. Receipt of Securities.
(a) Except as provided by Paragraph 7 hereof,
Provident shall hold and physically segregate in a separate account,
identifiable at all times from those of any other persons, firms, or
corporations, all securities and non-cash property received by it for the
account of the Fund. All such securities and non-cash property are to be held or
disposed of by Provident for the Fund pursuant to the terms of this Agreement.
In the absence of Written Instructions accompanied by a certified resolution of
the Fund's Board of Directors authorizing the transaction, Provident shall have
no power or authority to withdraw, deliver, assign, hypothecate, pledge or
otherwise dispose of any such securities and investments except in accordance
with the express terms provided for in this Agreement. In no case may any
Director, officer, employee or agent of the Fund withdraw any securities. In
connection with its duties under this Paragraph 6, Provident may, at its own
expense, enter into sub-custodian agreements with other banks or trust companies
for the receipt of certain securities and cash to be held by Provident for the
account of the Fund pursuant to this Agreement; provided that each such bank or
trust company has an aggregate capital, surplus and undivided profits, as shown
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by its last published report, of not less than one million dollars ($1,000,000)
for a Provident subsidiary or affiliate, or of not less than twenty million
dollars ($20,000,000) if such bank or trust company is not a Provident
subsidiary or affiliate and that in either case such bank or trust company
agrees with Provident to comply with all relevant provisions of the 1940 Act and
applicable rules and regulations thereunder. Provident shall remain responsible
for the performance of all of its duties under this Agreement and shall hold the
Fund harmless from the acts and omissions, under the standards of care provided
for herein, of any bank or trust company that it might choose pursuant to this
Paragraph 6.
(b) Where securities are transferred to an account of
the Fund established pursuant to Paragraph 7 hereof, Provident shall also by
book-entry or otherwise identify as belonging to the Fund the quantity of
securities in a fungible bulk of securities registered in the name of Provident
(or its nominee) or shown in Provident's account on the books of the Book-Entry
System. At least monthly and from time to time, Provident shall furnish the Fund
with a detailed statement of the Property held for the Fund under this
Agreement.
7. Use of Book-Entry System. The Fund shall deliver to
Provident certified resolutions of the Board of Directors of the Fund approving,
authorizing and instructing Provident on a continuous and on-going basis until
instructed to the contrary by Oral or Written Instructions actually received by
Provident (a) to deposit in the Book-Entry System all securities belonging to
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the Fund eligible for deposit therein and (b) to utilize the Book-Entry System
to the extent possible in connection with settlements of purchases and sales of
securities by the Fund, and deliveries and returns of securities loaned, subject
to repurchase agreements or used as collateral in connection with borrowings.
Without limiting the generality of such use, it is agreed that the following
provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in
the Book-Entry System will at all times be segregated from any assets and cash
controlled by Provident in other than a fiduciary or custodian capacity but may
be commingled with other assets held in such capacities. Provident and its
sub-custodian, if any, will pay out money only upon receipt of securities and
will deliver securities only upon the receipt of money.
(b) All books and records maintained by Provident
which relate to the Fund's participation in the Book-Entry System will at all
times during Provident's regular business hours be open to the inspection of the
Fund's duly authorized employees or agents, and the Fund will be furnished with
all information in respect of the services rendered to it as it may require.
(c) Provident will provide the Fund with copies of
any report obtained by Provident on the system of internal accounting control of
the Book-Entry System promptly after receipt of such a report by Provident.
Provident will also provide the Fund with such reports on its own system of
internal control as the Fund may reasonably request from time to time.
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8. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement,
Provident shall act only upon Oral and Written Instructions. Although Provident
may know of the provisions of the Charter and By-Laws of the Fund, Provident may
assume that any Oral or Written Instructions received hereunder are not in any
way inconsistent with any provisions of such Charter or By-Laws or any vote,
resolution or proceeding of the Shareholders, or of the Board of Directors, or
of any committee thereof.
(b) Provident shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by Provident
pursuant to this Agreement. The Fund agrees to forward to Provident Written
Instructions confirming Oral Instructions in such manner that the Written
Instructions are received by Provident by the close of business of the same day
that such Oral Instructions are given to Provident. The Fund agrees that the
fact that such confirming Written Instructions are not received by Provident
shall in no way affect the validity of the transactions or enforceability of the
transactions authorized by the Fund by giving Oral Instructions. The Fund agrees
that Provident shall incur no liability to the Fund in acting upon Oral
Instructions given to Provident hereunder concerning such transactions provided
such instructions reasonably appear to have been received from an Authorized
Person.
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9. Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, Provident is authorized to take the following
actions:
(a) Collection of Income and Other Payments.
Provident shall:
(i) collect and receive for the account of
the Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, bond coupons, option
premiums and similar items, included or to be included in the Property,
and promptly advise the Fund of such receipt and shall credit such
income, as collected, to the Fund's custodian account;
(ii) endorse and deposit for collection, in
the name of the Fund, checks, drafts, and negotiable instruments or
other orders for the payment of money on the same day as received;
(iii) receive and hold for the account of
the Fund all securities received as a distribution on the Fund's
portfolio securities as a result of a stock dividend, share split-up or
reorganization, recapitalization, readjustment or other rearrangement
or distribution of rights or similar securities issued with respect to
any portfolio securities belonging to the Fund held by Provident
hereunder;
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(iv) present for payment and collect the
amount payable upon all securities which may mature or be called,
redeemed, or retired, or otherwise become payable on the date such
securities become payable; and
(v) take any action which may be necessary
and proper in connection with the collection and receipt of such income
and other payments and the endorsement for collection of checks,
drafts, and other negotiable instruments as described in Paragraph 24
of this Agreement.
(b) Miscellaneous Transactions. Provident is
authorized to deliver or cause to be delivered Property against payment or other
consideration or written receipt therefor in the following cases:
(i) for examination by a broker selling for
the account of the Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or
temporary securities for definitive securities; and
(iii) for transfer of securities into the
name of the Fund or Provident or nominee of either, or for exchange of
securities for a different number of bonds, certificates, or other
evidence, representing the same aggregate face amount or number of
units bearing the same interest rate, maturity date and call
provisions, if any; provided that, in any such case, the new securities
are to be delivered to Provident.
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10. Transactions Requiring Instructions. Upon receipt of Oral
or Written Instructions and not otherwise, Provident, directly or through the
use of the Book-Entry System, shall:
(a) execute and deliver to such persons as may be
designated in such Oral or Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the authority of the
Fund as owner of any securities may be exercised;
(b) deliver any securities held for the Fund against
receipt of other securities or cash issued or paid in connection with
the liquidation, reorganization, refinancing, tender offer, merger,
consolidation or recapitalization of any corporation, or the exercise
of any conversion privilege;
(c) deliver any securities held for the Fund to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and receive and
hold under the terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be issued to
it to evidence such delivery;
(d) make such transfers or exchanges of the assets of
the Fund and take such other steps as shall be stated in said Oral or
Written Instructions to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation
or recapitalization of the Fund;
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(e) release securities belonging to the Fund to any
bank or trust company for the purpose of pledge or hypothecation to
secure any loan incurred by the Fund; provided, however, that
securities shall be released only upon payment to Provident of the
monies borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, subject to proper prior
authorization, further securities may be released for that purpose; and
repay such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing the loan;
(f) release and deliver securities owned by the Fund
in connection with any repurchase agreement entered into on behalf of
the Fund, but only on receipt of payment therefor; and pay out moneys
of the Fund in connection with such repurchase agreements, but only
upon the delivery of the securities; and
(g) otherwise transfer, exchange or deliver
securities in accordance with Oral or Written Instructions.
11. Segregated Accounts.
(a) Provident shall upon receipt of Written or Oral
Instructions establish and maintain a segregated account or accounts on its
records for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities in the Book-Entry
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System (i) for the purposes of compliance by the Fund with the procedures
required by a securities or option exchange, providing such procedures comply
with the 1940 Act and Release No. 10666 or any subsequent release or releases of
the SEC relating to the maintenance of segregated accounts by registered
investment companies, and (ii) for other proper corporate purposes, but only, in
the case of clause (ii), upon receipt of Written Instructions.
(b) Provident may enter into separate custodial
agreements with various futures commission merchants ("FCMs") that the Fund uses
(each an "FCM Agreement"), pursuant to which the Fund's margin deposits in any
transactions involving futures contracts and options on futures contracts will
be held by Provident in accounts (each an "FCM Account") subject to the
disposition by the FCM involved in such contracts in accordance with the
customer contract between FCM and the Fund ("FCM Contract"), SEC rules governing
such segregated accounts, CFTC rules and the rules of the applicable commodities
exchange. Such FCM Agreements shall only be entered into upon receipt of Written
Instructions from the Fund which state that (i) a customer agreement between the
FCM and the Fund has been entered into; and (ii) the Fund is in compliance with
all the rules and regulations of the CFTC. Transfers of initial margin shall be
made into an FCM Account only upon Written Instructions; transfers of premium
and variation margin may be made into an FCM Account pursuant to Oral
Instructions. Transfers of funds from an FCM Account to the FCM for which
Provident holds such an account may only occur upon certification by the FCM to
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Provident that pursuant to the FCM Agreement and the FCM Contract, all
conditions precedent to its right to give Provident such instruction have been
satisfied.
12. Dividends and Distributions. The Fund shall furnish
Provident with appropriate evidence of action by the Fund's Board of Directors
declaring and authorizing the payment of any dividends and distributions. Upon
receipt by Provident of Written Instructions with respect to dividends and
distributions declared by the Fund's Board of Directors and payable to
Shareholders who have elected in the proper manner to receive their
distributions or dividends in cash, and in conformance with procedures mutually
agreed upon by Provident, the Fund, and the Fund's Transfer Agent, Provident
shall pay to the Fund's Transfer Agent, as agent for the Shareholders, an amount
to the amount indicated in said Written Instructions as payable by the Fund to
such Shareholders for distribution in cash by the Transfer Agent to such
Shareholders. In lieu of paying the Fund's Transfer Agent cash dividends and
distributions, Provident may arrange for the direct payment of cash dividends
and distributions to Shareholders by Provident in accordance with such
procedures and controls as are mutually agreed upon from time to time by and
among the Fund, Provident and the Fund's Transfer Agent.
In accordance with the Prospectus, the Internal Revenue Code
and regulations promulgated thereunder, and with such procedures and controls as
are mutually agreed upon from time to time by and among the Fund, Provident and
the Fund's Transfer Agent, Provident shall arrange for the establishment of XXX
custodian accounts for such Shareholders holding Shares through XXX accounts.
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13. Purchases of Securities. Promptly after each decision to
purchase securities by the Advisor, the Fund, through the Advisor, shall deliver
to Provident Oral Instructions specifying with respect to each such purchase:
(a) the name of the issuer and the title of the securities, (b) the number of
shares or the principal amount purchased and accrued interest, if any, (c) the
date of purchase and settlement, (d) the purchase price per unit, (e) the total
amount payable upon such purchase and (f) the name of the person from whom or
the broker through whom the purchase was made. Provident shall upon receipt of
securities purchased by or for the Fund pay out of the moneys held for the
account of the Fund the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Oral Instructions.
14. Sales of Securities. Promptly after each decision to sell
securities by the Advisor or exercise of an option written by the Fund, the
Fund, through the Advisor, shall deliver to Provident Oral Instructions,
specifying with respect to each such sale: (a) the name of the issuer and the
title of the security, (b) the number of shares or principal amount sold, and
accrued interest, if any, (c) the date of sale, (d) the sale price per unit, (e)
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the total amount payable to the Fund upon such sale, and (f) the name of the
broker through whom or the person to whom the sale was made. Provident shall
deliver the securities upon receipt of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as set
forth in such Oral Instructions. Subject to the foregoing, Provident may accept
payment in such form as shall be satisfactory to it, and may deliver securities
and arrange for payment in accordance with the customs prevailing among dealers
in securities.
15. Records. The books and records pertaining to the Fund
which are in the possession of Provident shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the 1940 Act
and other applicable securities laws and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during Provident's normal business hours. Upon the reasonable request of
the Fund, copies of any such books and records shall be provided by Provident to
the Fund or the Fund's authorized representative at the Fund's expense.
16. Reports.
(a) Provident shall furnish the Fund the following
reports:
(i) such periodic and special reports as the
Fund may reasonably request;
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(ii) a monthly statement summarizing all
transactions and entries for the account of the Fund, listing the
portfolio securities belonging to the Fund with the adjusted average
cost of each issue and the market value at the end of such month, and
stating the cash account of the Fund including disbursements;
(iii) the reports to be furnished to the
Fund pursuant to Rule 17f-4; and
(iv) such other information as may be agreed
upon from time to time between the Fund and Provident.
(b) Provident shall transmit promptly to the Fund any
proxy statement, proxy materials, notice of a call or conversion or similar
communications received by it as Custodian of the Property.
17. Cooperation with Accountants. Provident shall cooperate
with the Fund's independent public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to assure that
the necessary information is made available to such accountants for the
expression of their opinion, as such may be required from time to time by the
Fund.
18. Confidentiality. Provident agrees on behalf of itself and
its employees to treat confidentially all records and other information relative
to the Fund and its prior, present, or potential Shareholders, except, after
prior notification to and approval in writing by the Fund, which approval shall
not be unreasonably withheld and may not be withheld where Provident may be
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exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Fund.
19. Right to Receive Advice.
(a) Advice of Fund. If Provident shall be in doubt as
to any action to be taken or omitted by it, it may request, and shall receive,
from the Fund directions or advice, including Oral or Written Instructions where
appropriate.
(b) Advice of Counsel. If Provident shall be in doubt
as to any question of law involved in any action to be taken or omitted by
Provident, it may request advice at its own cost from counsel of its own
choosing (who may be counsel for the Advisor, the Fund or Provident, at the
option of Provident).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by Provident
pursuant to subparagraph (a) of this paragraph and advice received by Provident
pursuant to subparagraph (b) of this paragraph, Provident shall be entitled to
rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of Provident. Provident shall be
protected in any action or inaction which it takes in reliance on any
directions, advice or Oral or Written Instructions received pursuant to
subparagraphs (a) or (b) of this paragraph which Provident, after receipt of any
such directions, advice or Oral or Written Instructions, in good faith believes
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to be consistent with such directions, advice or Oral or Written Instructions,
as the case may be. However, nothing in this paragraph shall be construed as
imposing upon Provident any obligation (i) to seek such directions, advice or
Oral or Written Instructions, or (ii) to act in accordance with such directions,
advice or Oral or Written Instructions when received, unless, under the terms of
another provision of this Agreement, the same is a condition to Provident's
properly taking or omitting to take such action. Nothing in this subsection
shall excuse Provident when an action or omission on the part of Provident
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by Provident of any duties or obligations under this Agreement.
20. Compliance with Governmental Rules and Regulations.
Provident undertakes to comply with all applicable requirements of the 1933 Act,
the 1934 Act, the 1940 Act, the CEA, and any laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties to be
performed by Provident hereunder.
21. Compensation. As compensation for the services rendered by
Provident during the term of this Agreement, the Fund will pay to Provident
monthly fees that shall be agreed upon from time to time in writing by Provident
and the Fund.
22. Indemnification. The Fund, as sole owner of the Property,
agrees to indemnify and hold harmless Provident and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including without
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limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act,
the CEA, and any state and foreign securities and blue sky laws, all as or to be
amended from time to time) and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly (a) from the
fact that securities included in the Property are registered in the name of any
such nominee or (b) without limiting the generality of the foregoing clause (a)
from any action or thing which Provident takes or does or omits to take or do
(i) at the request or on the direction of or in reliance on the advice of the
Fund or (ii) upon Oral or Written Instructions, provided, that neither Provident
nor any of its nominees shall be indemnified against any liability to the Fund
or to its Shareholders (or any expenses incident to such liability) arising out
of Provident's or such nominee's own willful misfeasance, bad faith, negligence
or reckless disregard of its duties or responsibilities specifically described
in this Agreement. In the event of any advance of cash for any purpose made by
Provident resulting from Oral or Written Instructions of the Fund, or in the
event that Provident or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the account of the Fund shall be security
therefor.
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23. Responsibility of Provident. Provident shall be under no
duty to take any action on behalf of the Fund except as specifically set forth
herein or as may be specifically agreed to by Provident in writing. In the
performance of its duties hereunder, Provident shall be obligated to exercise
care and diligence and to act in good faith and to use its best efforts within
reasonable limits to insure the accuracy and completeness of all services
performed under this Agreement. Provident shall be responsible for its own
negligent failure to perform its duties under this Agreement, but to the extent
that duties, obligations and responsibilities are not expressly set forth in
this Agreement, Provident shall not be liable for any act or omission which does
not constitute willful misfeasance, bad faith or gross negligence on the part of
Provident or reckless disregard of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, Provident in connection with its duties under
this Agreement shall not be under any duty or obligation to inquire into and
shall not be liable for or in respect of (a) the validity or invalidity or
authority or lack thereof of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this Agreement, if
any, and which Provident reasonably believes to be genuine; (b) the validity or
invalidity of the issuance of any securities included or to be included in the
Property, the legality or illegality of the purchase of such securities, or the
-24-
propriety or impropriety of the amount paid therefor; (c) the legality or
illegality of the sale (or exchange) of any Property or the propriety or
impropriety of the amount for which such Property is sold (or exchanged); or (d)
delays or errors or loss of data occurring by reason of circumstances beyond
Provident's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply, nor shall Provident be under any
duty or obligation to ascertain whether any Property at any time delivered to or
held by Provident may properly be held by or for the Fund. Provident expressly
disclaims all responsibility for consequential damages, including but not
limited to any that may result from performance or non-performance of any duty
or obligation whether express or implied in this Agreement, and also expressly
disclaims any express or implied warranty of products or services provided in
connection with this Agreement.
24. Collections. All collections of monies or other property
in respect, or which are to become part, of the Property (but not the
safekeeping thereof upon receipt by Provident) shall be at the sole risk of the
Fund. In any case in which Provident does not receive any payment due the Fund
within a reasonable time after Provident has made proper demands for the same,
it shall so notify the Fund in writing, including copies of all demand letters,
any written responses thereto, and memoranda of all oral responses thereto and
-25-
to telephonic demands, and await instructions from the Fund. Provident shall not
be obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. Provident shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not collected in due
course.
25. Duration and Termination. This Agreement shall continue
until termination by the Fund or by Provident in either case on sixty (60) days
written notice. Upon any termination of this Agreement, pending appointment of a
successor to Provident or vote of the Shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities or other property,
Provident shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than twenty million dollars ($20,000,000) as a
custodian for the Fund to be held under terms similar to those of this
Agreement, provided, however, that Provident shall not be required to make any
such delivery or payment until full payment shall have been made by the Fund of
all liabilities constituting a charge on or against the properties of the Fund
then held by Provident or on or against Provident and until full payment shall
have been made to Provident of all of its fees, compensation, costs and
expenses.
-26-
26. Notices. All notices and other communications, including
Written Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to
Provident at Provident's address, Airport Business Center, International Court
2, 000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxx 00000, marked for the attention of
the Custodian Services Department (or its successor); (b) if to the Fund, at the
address of the Fund; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice and the address of the
addressee thereof are, at the time of sending, more than 100 miles apart, the
Notice may be sent by first-class mail, in which case it shall be deemed to have
been given five days after it is sent, or if sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately, and, if the location of the sender of a Notice and the address of
the addressee thereof are, at the time of sending, not more than 100 miles
apart, the Notice may be sent by first-class mail, in which case it shall be
deemed to have been given three days after it is sent, or if sent by messenger,
it shall be deemed to have been given on the day it is delivered, or if sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately. All postage, cable, telegram, telex and
-27-
facsimile sending device charges arising from the sending of a Notice hereunder
shall be paid by the sender.
27. Further Actions. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
28. Amendments. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the party against
which enforcement of such change or waiver is sought.
29. Delegation. On thirty (30) days prior written notice to
the Fund, Provident may assign its rights and delegate its duties hereunder to
any wholly-owned direct or indirect subsidiary of Provident National Bank or PNC
Financial Corp, provided that (i) the delegate agrees with Provident to comply
with all relevant provisions of the 1940 Act; and (ii) Provident and such
delegate shall promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the delegation,
including (without limitation) the capabilities of the delegate.
30. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
31. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
-28-
that the parties hereto may embody in one or more separate documents their
agreement, if any, with respect to delegated and/or Oral Instructions. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be deemed to be a contract made in
Pennsylvania and governed by Pennsylvania law. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding and shall inure to the benefit of the parties hereto
and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on the day and year
first above written.
[SEAL] FLAG INVESTORS TELEPHONE
INCOME FUND, INC.
Attest: /s/ Xxxxx X. Xxxxxx By /s/ Xxxxxx X. Xxxxxxxx
----------------------- ----------------------------
[SEAL] PROVIDENT NATIONAL BANK
Attest: /s/ Xxxxxx Xxxxxxx By /s/ X. Xxxxxxxx
----------------------- ----------------------------
-29-
INDEX
Paragraph Page
--------- ----
1. Appointment............................................................ 1
2. Delivery of Documents.................................................. 2
3. Definitions............................................................ 4
4. Delivery and Registration of the Property.............................. 6
5. Receipt and Disbursement of Money...................................... 7
6. Receipt of Securities.................................................. 8
7. Use of Book-Entry System............................................... 9
8. Instructions Consistent with Charter, etc.............................. 11
9. Transactions Not Requiring Instructions................................ 12
10. Transactions Requiring Instructions.................................... 14
11. Segregated Accounts.................................................... 15
12. Dividends and Distributions............................................ 17
13. Purchases of Securities................................................ 18
14. Sales of Securities.................................................... 18
15. Records................................................................ 19
16. Reports................................................................ 19
17. Cooperation with Accountants........................................... 20
18. Confidentiality........................................................ 20
19. Right to Receive Advice................................................ 21
20. Compliance with Governmental Rules and Regulations..................... 22
21. Compensation........................................................... 22
22. Indemnification........................................................ 22
23. Responsibility of Provident............................................ 24
24. Collections............................................................ 25
25. Duration and Termination............................................... 26
26. Notices................................................................ 27
27. Further Actions........................................................ 28
28. Amendments............................................................. 28
29. Delegation............................................................. 28
30. Counterparts........................................................... 28
31. Miscellaneous.......................................................... 28
-30-
