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Exhibit 99.8(b)
SPECIAL CUSTODY ACCOUNT AGREEMENT
(Short Sales)
AGREEMENT (hereinafter "Agreement") dated as of June ___,
1998, by and among Custodial Trust Company in its capacity as custodian
hereunder (the "Bank"), Puget Sound Alternative Investment Series Trust on
behalf of its Puget Sound Market Neutral Portfolio ("Customer"), and Bear,
Xxxxxxx Securities Corp. (the "Broker").
WHEREAS, Broker is a securities broker-dealer and is a member of
several national securities exchanges; and
WHEREAS, Customer is a registered investment company which desires from
time to time to execute various securities transactions, including short sales
(which are permitted by Customer's investment policies), and in connection
therewith has executed Broker's Customer Agreement (the "Customer Agreement")
which provides for margin transactions; and
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Broker with the provisions of Regulation T of the Board of
Governors of the Federal Reserve System and other applicable requirements
("Margin Rules"); and
WHEREAS, to assist Broker and Customer in complying with the Margin
Rules, Bank is prepared to act as custodian to hold Collateral as defined below.
NOW THEREFORE, be it agreed as follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
(a) "Adequate Margin" in respect of short sales shall mean such
collateral as is adequate in Broker's reasonable judgment
under the Margin Rules and the internal policies of Broker,
the latter of which shall be subject to modifications by
Broker only upon prior notice given to Customer and Bank.
(b) "Advice from Broker" or "Advice" means a written notice sent
to Customer and Bank or transmitted by a facsimile sending
device, except that Advice for initial or additional
Collateral or with respect to Broker's ability to effect a
short sale for the Customer may be given orally. With respect
to any short sale or Closing Transaction, the Advice from
Broker shall mean a standard confirmation in use by Broker and
sent or transmitted to Customer and Bank. With respect to
substitutions
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or releases of Collateral, Advice from Broker means a written
notice signed by Broker and sent or transmitted to Customer
and Bank. An authorized agent of Broker will certify to
Customer and Bank the names and signatures of those employees
who are authorized to sign Advice from Broker, which
certification may be amended from time to time. When used
herein, the term "advise" means the act of sending an Advice
from Broker.
(c) "Closing Transaction" is a transaction in which Customer
purchases securities which have been sold short.
(d) "Collateral" shall mean cash or U.S. Government securities or
other securities acceptable to Broker.
(e) "Custody Agreement" shall mean the agreement for general
custodial services between the Bank and Customer.
(f) "Insolvency" means that (A) an order, judgment or decree has
been entered under the bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law (herein called the "Bankruptcy
law") of any competent jurisdiction adjudicating Customer
insolvent; or (B) Customer has petitioned or applied to any
tribunal for, or consented to the appointment of, or taking
possession by, a trustee, receiver, liquidator or similar
official, of Customer, or commenced a voluntary case under the
Bankruptcy Law of the United States or any proceedings
relating to Customer under the Bankruptcy Law of any other
competent jurisdiction, whether now or hereinafter in effect;
or (C) any such petition or application has been filed, or any
such proceedings commenced, against Customer and Customer by
any act has indicated its approval thereof, consent thereto or
acquiescence therein, or an order for relief has been entered
in an involuntary case under the Bankruptcy Law of the United
States, as now or hereinafter constituted, or an order,
judgment or decree has been entered appointing any such
trustee, receiver, liquidator or similar official, or
approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for
more than 60 days.
(g) "Instructions from Customer" or "Instructions" means a
request, direction or certification in writing signed by
Customer and delivered to Bank and Broker or transmitted by a
facsimile sending device. An officer of Customer will certify
to Bank and Broker the names and signatures of those persons
authorized to sign the instructions, which certification may
be amended from time to time. When used herein, the term
"Instruct" shall mean the act of sending an Instruction from
Customer.
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(h) "Receipt of Payment" means receipt by Bank of (1) a certified
or official bank check or wire transfer to Bank; (2) a written
or telegraphic Advice from a registered clearing agency that
funds have been or will be credited to the account of Bank; or
(3) a transfer of funds from any of Broker's accounts
maintained at Bank.
(i) "Receipt of Securities" means receipt by Bank of (1)
securities in proper form for transfer; or (2) a written or
telegraphic Advice from a registered clearing agency that
securities have been credited to the account of Bank for the
Special Custody Account.
(j) "Special Custody Account" shall have the meaning assigned to
that term in Section 2 hereof.
2. SPECIAL CUSTODY ACCOUNT
(a) Opening Custody Account. Bank shall open an account on its
books entitled "Special Custody Account for Bear, Xxxxxxx
Securities Corp. as Pledgee of Puget Sound Alternative
Investment Series Trust on behalf of its Puget Sound Market
Neutral Portfolio (the "Special Custody Account") and shall
hold therein all securities and similar property as shall be
received and accepted by it therein pursuant to this
Agreement. Customer agrees to instruct Bank in Instructions
from Customer as to cash and specific securities which Bank is
to identify on its books and records as pledged to Broker as
Collateral in the Special Custody Account. Customer agrees
that the value of such cash and securities shall be at least
equal in value to what Broker shall initially and from time to
time advise Customer in an Advice from Broker as being
necessary to constitute Adequate Margin. Such Collateral (i)
will be held by Bank for Broker as agent of Broker, (ii) may
be released only in accordance with the terms of this
Agreement, and (iii) except as required to be released
hereunder to Broker, shall not be made available to Broker or
any other person claiming through Broker, including the
creditors of Broker. In the event Customer wishes to add
another series of Puget Sound Alternative Investment Series
Trust to this Agreement, the title of such account shall be
appended to this Agreement as a schedule.
(b) Security Interest. Customer hereby grants a continuing
security interest to Broker in the Collateral in the Special
Custody Account. To perfect Broker's security interest, Bank
will hold the Collateral in the Special Custody Account,
subject to the interest therein of Broker as the pledgee and
secured party thereof in accordance with the terms of this
Agreement. Such security interest will terminate at such time
as Collateral is released as provided herein. Bank shall have
no responsibility for the validity or enforceability of such
security interest.
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(c) Confirmation. Bank will confirm in writing to Broker and
Customer all pledges, releases or substitutions of Collateral
and will supply Broker and Customer with a monthly statement
of Collateral and transactions in the Special Custody Account
for such month. Bank will also advise Broker upon request of
the kind and amount of Collateral pledged to Broker.
(d) Excess Collateral. Upon the request of Customer, Broker shall
advise Bank and Customer of any excess of Collateral in the
Special Custody Account. Such excess shall at Customer's
request be transferred from the Special Custody Account to
Customer upon Bank's receipt of Advice from Broker.
(e) Accounts and Records. Bank will maintain accounts and records
for the Collateral in the Special Custody Account as more
fully described in sub-paragraph 5(a) below. The Collateral
shall at all times remain the property of Customer subject
only to the extent of the interest and rights therein of
Broker as the pledgee thereof.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
(a) Short Sales. From time to time, Customer may place orders with
Broker for the short sale of securities. Prior to the
acceptance of such orders Broker will advise Customer of
Broker's ability to borrow such securities or other
properties, and acceptance of short sale orders will be
contingent upon same.
(b) Open Short Sales Balance. Broker shall, based on the closing
market price on each business day, compute the aggregate net
credit or debit balance on Customer's open short sales and
advise Customer and/or Customer's designated agent by 11:00
A.M. New York time on the next business day (the
"Determination Day") of the amount of the net debit or credit,
as the case may be. If a net debit balance exists on the
Determination Day, Customer will cause an amount equal to such
net debit balance to be paid to Broker by the close of
business on the Determination Day. If a net credit balance
exists on the Determination Day, Broker will pay such credit
balance to Customer by the close of business on the
Determination Day. As Customer's open short positions are
marked-to-market each business day, payments will be made by
or to Customer to reflect changes (if any) in the credit or
debit balances. To the extent payments are not made as
aforesaid, Broker will charge interest on debit balances, and
Broker will pay interest on credit balances. Balances will be
appropriately adjusted when short sales are closed out.
4. PLACING ORDERS
It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such and
hereby authorizes Broker to xxxx such
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order as being "short" and, when placing with Broker any order to sell long for
Customer's account, will designate the order as such and hereby authorizes
Broker to xxxx such order as being "long." Any sell order which Customer shall
designate as being for long account as above provided is for securities then
owned by Customer, and if such securities are not then deliverable by Broker
from any account of Customer, the placing of such order shall constitute a
representation by Customer that it is impracticable for Customer then to deliver
such securities to Broker but that Customer shall deliver them by the settlement
date or as soon as possible thereafter.
5. RIGHTS AND DUTIES OF THE BANK
(a) Generally. The Bank shall receive and hold in the Special
Custody Account, as custodian upon the terms of this
Agreement, all Collateral deposited and maintained pursuant to
the terms of this Agreement and, except as provided in
sub-paragraph 5(b) below, shall receive and hold all monies
and other property paid, distributed or substituted in respect
of such Collateral or realized on the sale or other
disposition of such Collateral; provided, however, that the
Bank shall have no duty to require any money or securities to
be delivered to it or to determine that the amount and form of
assets delivered to it comply with any applicable
requirements. Collateral held in the Special Custody Account
shall be released only in accordance with this Agreement or as
required by applicable law. The Customer grants its authority
to deposit in such account any money, securities and other
property received by the Bank. The Bank may hold the
securities in the Special Custody Account in bearer, nominee,
book entry, or other form and in a depository or clearing
corporation, with or without indicating that the securities
are held hereunder; provided, however, that all securities
held in the Special Custody Account shall be identified on the
Bank's records as subject to this Agreement and shall be in a
form that permits transfer without additional authorization or
consent of Customer.
(b) Dividends and Interest. Any interest, dividends or other
distributions paid with respect to the Collateral held in the
Special Custody Account shall be retained therein as
additional Collateral, unless requested by Customer in
accordance with the provision in this Agreement concerning the
release of excess Collateral.
(c) Reports. The Bank shall, as promptly as practical, but in no
event later than the next business day, provide Broker and
Customer and/or Customer's designated agent with written
confirmation of each transfer into and out of the Special
Custody Account. The Bank also shall render to the Broker and
Customer and/or Customer's designated agent a monthly
statement of the Collateral held in the Special Custody
Account. In addition, the Bank will advise the Broker and
Customer and/or Customer's designated agent, upon request of
the Broker or Customer, at any time of the type and amount of
Collateral held in the account; provided, however, that the
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Bank shall have no responsibility for making any determination
as to the value of such Collateral.
(d) Limitation of Bank's Liability. The Bank's duties and
responsibilities are set forth in this Agreement. The Bank
shall act only upon receipt of Advice from Broker regarding
release or substitution of Collateral. The Bank shall not be
liable or responsible for anything done or omitted to be done
by it in good faith and in the absence of negligence and may
rely and shall be protected in acting upon any notice,
instruction or other communication which it reasonably
believes to be genuine and authorized. As between Customer and
the Bank, the terms of the Custody Agreement entered into
thereby shall apply with respect to the responsibilities of
the Bank and any losses or liabilities of such parties arising
out of matters covered by this Agreement. As between the Bank
and Broker, Broker shall indemnify and hold the Bank harmless
with regard to any losses or liabilities of the Bank
(including counsel fees) imposed on or incurred by the Bank
arising out of any action or omission of the Bank in
accordance with any Advice, notice or instruction of Broker
under this Agreement. In matters concerning or relating to
this Agreement, the Bank shall not be responsible for
compliance with any statute or regulation regarding the
establishment or maintenance of margin credit, including but
not limited to Regulations T or X of the Board of Governors of
the Federal Reserve System, or with any rules or regulations
of the Office of the Controller of the Currency (or the
Securities and Exchange Commission). With respect to all
securities, however registered, it is understood that all
voting rights and other rights and powers shall be exercised
exclusively by Customer. Bank shall mail to Customer any
documents received, including proxy statements and offering
circulars, with any proxies for securities registered in a
nominee name executed by such nominee. The Bank shall not be
liable to any party for any acts or omissions of the other
parties to this Agreement.
6. DEFAULT
In the event of any failure by Customer to timely comply with any
obligation on Customer's part to be performed or observed under this Agreement
or the Customer Agreement, including, but not limited to, the obligation to
maintain Adequate Margin, or in the event of Customer's Insolvency, Broker may
effect a Closing Transaction or buy-in of any securities of which Customer's
account may be short, provided that Broker shall first use reasonable efforts to
(i) give notice to Customer or Manager specifying such default (which notice may
be by telegraph, facsimile transmission or hand delivery) and (ii) hold a
discussion with Customer or Manager regarding such default and Broker's intended
actions in response thereto. Notwithstanding the foregoing, neither notice nor a
discussion shall be required in the event market conditions render same
impracticable in the reasonable discretion of Broker. In the event of any such
default, after making a reasonable attempt to give notice to and hold a
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discussion with Customer or Manager, Broker shall also have the right to sell
any and all Collateral in the Special Custody Account and to give Advice to Bank
to deliver such Collateral free of payment to Broker, which Advice shall state
that, pursuant to this Agreement, the condition precedent to Broker's right to
receive such Collateral free of payment has occurred. The Bank will provide
immediate notice to Customer or Manager by telephone of any receipt by Bank of
Advice from Broker to deliver Collateral free of payment, and shall promptly
effect delivery of Collateral to Broker. Subject to applicable requirements of
the New York Uniform Commercial Code, such sale or purchase may be made
according to Broker's judgement and may be made at Broker's discretion, on the
principal exchange or other market for such securities, or in the event such
principal market is closed, in a manner commercially reasonable for such
securities. For purposes of this paragraph, the term "Manager" shall be deemed
to mean Puget Sound Asset Management Co., LLC, the investment manager to
Customer.
7. LIMITATION OF BROKER LIABILITY
Broker shall not be liable for any losses, costs, damages, liabilities
or expenses suffered or incurred by Customer as a result of any transaction
executed hereunder, or any other action taken or not taken by Broker hereunder
for Customer's account at Customer's direction or otherwise, except to the
extent that such loss, cost, damage, liability or expense is the result of
Broker's own negligence, recklessness, willful misconduct or bad faith.
8. CUSTOMER REPRESENTATION
Customer represents and warrants that the Collateral will not be
subject to any other liens or encumbrances other than those granted to the Bank
under the Custody Agreement.
9. TERMINATION
Any of the parties hereto may terminate this Agreement by 30 days'
notice in writing to the other parties hereto; provided, however, that the
status of any short sales, and of Collateral held at the time of such notice to
margin such short sales shall not be affected by such termination until the
release of such Collateral pursuant to applicable law or regulations or rules of
any self regulatory organization to which the Broker is subject. In the event of
the release of Collateral, the Collateral shall be transferred to a proper
custody account of Customer in the Bank.
10. NOTICE
Written communications hereunder shall be telegraphed, sent by
facsimile transmission or hand delivered as required herein, when another method
of delivery is not specified, may be mailed first class postage prepaid, except
that written notice of termination shall be sent by certified mail, addressed:
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(a) if to Bank, to:
Custodial Trust Company
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Vice President - Trust Operations
Phone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to Customer, to:
Puget Sound Alternative Investment Series Trust
X.X. Xxx
Xxxxxxxx, XX 00000
Attn:
Phone:
Facsimile:
(c) if to Broker, to:
Bear, Xxxxxxx Securities Corp.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxx, Treasurer
Phone: (000) 000-0000
Facsimile: (000) 000-0000
11. CONTROLLING LAW
The construction and enforcement of this Agreement shall be subject to
and governed by the laws of the State of New York.
12. AMENDMENTS
No amendment of this Agreement shall be effective unless in writing and
signed by an authorized officer of each Broker, Customer and Bank.
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13. LIMITATION OF LIABILITY
To the extent that the trustees of Puget Sound Alternative Investment
Series Trust are regarded as entering into this Agreement, they do so only as
trustees thereof and not individually. The obligations under this Agreement of
Puget Sound Alternative Investment Series Trust or Puget Sound Market Neutral
Portfolio shall not be binding upon any trustee, officer or employee of Puget
Sound Alternative Investment Series Trust individually, but shall be binding
only upon the assets and property of Puget Sound Market Neutral Portfolio. Such
trustees, officers, employees and holders, when acting in such capacities, shall
not be personally liable under this Agreement, and Broker and Bank shall look
solely to the assets and property of Puget Sound Market Neutral Portfolio for
the performance of this Agreement thereby and for the payment of any claim
against Puget Sound Market Neutral Portfolio pertaining to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers as of the day and
year first above written.
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST ON
BEHALF OF ITS PUGET SOUND MARKET NEUTRAL PORTFOLIO
By:
--------------------------------
Name:
Title:
CUSTODIAL TRUST COMPANY
By:
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Name:
Title:
BEAR, XXXXXXX SECURITIES CORP.
By:
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Name:
Title:
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