[XXXXXXX XXXXX LOGO]
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SPECIAL CUSTODY ACCOUNT AGREEMENT
AGREEMENT dated , 199
AMONG:
(1) XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED ("Xxxxxxx Xxxxx"), a
Delaware corporation registered as a broker and dealer in securities pursuant to
the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"); and
(2) (the "Customer"), a
organized under the laws of the State of , and;
(3) (the "Custodian"), a
chartered under the laws of .
WHEREAS, Customer desires to establish a securities margin account with
Xxxxxxx Xxxxx to effect purchases and sales (including "Short Sales," as
hereinafter defined) of securities and/or to have Xxxxxxx Xxxxx finance certain
of Customer's securities transactions, all such transactions being consistent
with Customer's authorized investment objectives and policies; and
WHEREAS, Custodian is duly chartered under the laws of the United
States of America or of a State thereof to engage in the trust business and
maintains a custodian account on behalf of Customer ("Custodian Account") in
which it holds, or to which it has credited, securities, cash and other assets
owned by Customer, free and clear of any liens or other encumbrances of
Custodian or known to Custodian; and
WHEREAS, Xxxxxxx Xxxxx is a member of the New York Stock Exchange, Inc.
(the "NYSE"), as well as various other national securities exchanges, and
carries and services securities margin accounts for customers, executes orders
to purchase and sell securities on a cash or margin basis, and lends or arranges
for loans of securities to or behalf of customers to facilitate Short Sales;
NOW, THEREFORE, in consideration of the mutual covenants herein, and
for other good and valuable consideration, be it agreed as follows:
1. As used herein, the following terms have the following meanings:
"ADEQUATE MARGIN" in respect of transactions in securities shall mean
such Collateral (as hereinafter defined) as is adequate to collateralize an
extension of credit, including a loan of securities for purposes of effecting a
Short Sale, under applicable laws, rules and regulations, including Regulation T
of the Board of Governors of the Federal Reserve System ("Regulation T"), Rule
431 of the NYSE, and the internal policies of Xxxxxxx Xxxxx.
"ADVICE FROM XXXXXXX XXXXX" or "ADVICE" shall mean a notice sent by
Xxxxxxx Xxxxx to Customer or Custodian in writing or transmitted by a facsimile
sending device, except that Advice(s) for the deposit of Collateral as Adequate
Margin, whether requesting initial or maintenance margin, may be given to
Customer orally if followed by the issuance or transmission of written or
telegraphic confirmation to Customer no later than the close of business on the
same business day. In the event of a purchase or sale transaction, including a
Short Sale or a purchase to cover a Short Sale, the Advice from Xxxxxxx Xxxxx
shall mean a standard confirmation in use by Xxxxxxx Xxxxx and sent or
transmitted to Customer. With respect to substitutions or releases of
Collateral, "Advice from Xxxxxxx Xxxxx" or "Advice" shall mean a written notice
signed by a person authorized by Xxxxxxx Xxxxx and sent or transmitted to
Customer or Custodian. When used herein, the term "ADVISE" shall refer to the
issuance of a communication constituting an Advice from Xxxxxxx Xxxxx. Xxxxxxx
Xxxxx will certify to Custodian the names and signatures of those persons
authorized to issue Advice(s) on behalf of Xxxxxxx Xxxxx with respect to
substitutions or releases of Collateral and to give any other directions to, or
take any other action with, Custodian under or in respect of this agreement,
which certification may be amended from time to time.
"COLLATERAL" shall mean (a) "exempted securities" (as defined in
Section 3(a)(12) of the Exchange Act) and (b) "margin securities" (as defined in
Section 220.2(q) of Regulation T) which are held by Custodian in the Special
Custody Account to be established by Custodian for Xxxxxxx Xxxxx in accordance
with the provisions of this Agreement. .
"CUSTODIAN ACCOUNT" means the account of Customer with Custodian
operated in accordance with a custodian agreement ("Custodian Agreement")
between Customer and Custodian.
"CUSTOMER 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 jurisdiction adjudicating the
Customer insolvent; or (b) the 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 the Customer, or Customer
has commenced a voluntary case under the Bankruptcy Law of the United States or
any proceeding relating to the Customer under the Bankruptcy Law of any other
jurisdiction, whether now or hereinafter in effect; or (c) any such petition or
application has been filed, or any such proceedings commenced, against the
Customer and the Customer by any act has indicated its approval thereof, consent
thereto or acquiescence therein, or any order for relief has been entered on 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.
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"INSTRUCTIONS FROM CUSTOMER" or "INSTRUCTIONS" means a request,
direction or certification in writing signed by a person authorized by Customer
and delivered or transmitted by a facsimile sending device to, as appropriate in
the circumstances, Custodian or Xxxxxxx Xxxxx. Customer will certify to
Custodian the names and signatures of those persons authorized to issue
Instructions on behalf of Customer, which certification may be amended from time
to time. When used herein, the term "INSTRUCT" shall refer to the issuance of a
communication to Custodian or to Xxxxxxx Xxxxx constituting an Instruction from
Customer.
"SHORT SALE" shall have the meaning ascribed in Rule 3b-3, promulgated
by the Securities and Exchange Commission under the Exchange Act.
2. Xxxxxxx Xxxxx, upon receipt from Customer of such documents as
Xxxxxxx Xxxxx may require, shall open a securities account ("Securities
Account") on its books in the name of Customer for purposes of effecting the
securities transactions contemplated by this Agreement.
3. (a) Custodian shall open an account on its books entitled "Xxxxxxx
Xxxxx Collateral Account as Pledgee of "
(referred to herein as the "Special Custody Account") and shall transfer to,
receive and hold therein, as custodian for Xxxxxxx Xxxxx, such cash and
securities as shall be received and accepted as Collateral by Xxxxxxx Xxxxx
pursuant to this Agreement.
(b) All securities constituting Collateral shall be credited to and
held in the Special Custody Account in good deliverable form (i) with duly
executed stock or bond transfer powers with signatures guaranteed by a bank, or
(ii) registered in the name of Custodian or Custodian's nominee, or in the name
of the nominee of Depository Trust Company, the Federal Reserve Book-Entry
system, or (iii) in such other name(s) or manner(s) as may be agreed upon
between Custodian and Xxxxxxx Xxxxx. Customer acknowledges and agrees that all
securities delivered or otherwise transferred to Custodian for deposit to
Xxxxxxx Xxxxx'x Special Custody Account as Collateral shall be subject to
Xxxxxxx Xxxxx'x acceptance thereof, in its discretion.
(c) Customer hereby grants to Xxxxxxx Xxxxx a continuing first
priority security interest in the Collateral, and in any securities substituted
for or exchanged as Collateral, and the proceeds thereof, to secure its
obligations to Xxxxxxx Xxxxx in connection with the transactions contemplated by
this Agreement, or pursuant to the Investor CreditLine Agreement (or other form
of securities margin agreement) entered into between Customer and Xxxxxxx Xxxxx.
(d) Customer may substitute or exchange the securities constituting
Collateral held in the Special Custody Account only after Customer Instructs
Custodian to make the contemplated substitution or exchange and Xxxxxxx Xxxxx
Advises Custodian that such substitution or exchange is acceptable.
(e) Custodian agrees to release Collateral pledged to Xxxxxxx
Xxxxx hereunder and held in the Special Custody Account only upon the receipt of
an Advice from Xxxxxxx Xxxxx in accordance with this Agreement.
4. When placing an order with Xxxxxxx Xxxxx to effect a Short Sale,
Customer will designate the order as such and hereby authorizes Xxxxxxx Xxxxx to
xxxx such order as "short;" it being understood that Xxxxxxx Xxxxx'x acceptance
of such order will be contingent upon its ability to borrow the securities being
sold short; it being further understood, that Xxxxxxx Xxxxx has no obligation
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and makes no representation or warranty as to its ability to continue to borrow
the securities sold "short" or otherwise to protect the Short Sale for more than
the business day on which the Short Sale is effected. Customer will designate
each order to sell securities then owned by Customer, that Customer intends to
deliver to the purchaser thereof, as "long" and hereby authorizes Xxxxxxx Xxxxx
to xxxx each such order as being "long."
5. Xxxxxxx Xxxxx will, from time to time, Advise Customer of the amount
of Collateral necessary to constitute Adequate Margin and Customer will promptly
Instruct Custodian, acting as Customer's custodian, to transfer from Customer's
Custodian Account to Xxxxxxx Xxxxx'x Special Custody Account such cash and/or
securities as shall be necessary to equal or exceed the amount that constitutes
Adequate Margin. Custodian shall not be required to make any determination as to
whether (a) any securities that Customer Instructs Custodian to transfer or
otherwise deliver to Xxxxxxx Xxxxx'x Special Custody Account will be acceptable
by Xxxxxxx Xxxxx as Collateral or (b) whether the value of any such cash or
securities constitutes Adequate Margin; or whether the securities that are
credited to the Special Custody Account constitute collateral as herein defined.
6. Upon the request of Customer, Xxxxxxx Xxxxx will Advise Customer of
any Collateral in the Special Custody Account which may then be in excess of
Adequate Margin, as determined by Xxxxxxx Xxxxx each business day by valuing the
Collateral by "marking to the market." Xxxxxxx Xxxxx will Advise Custodian to
transfer all or a portion of such excess from its Special Custody Account to
Customer's Custodian Account promptly upon receipt of an Instruction to that
effect. Xxxxxxx Xxxxx agrees to so Advise Custodian.
7. The parties hereby make the following representations and
warranties, which shall continue during the term of all transactions executed
and maintained hereunder:
(a) Each party hereto represents and warrants that (i) it has the
power to execute and deliver this Agreement, to enter into the transactions
contemplated hereby and to perform its obligations hereunder; (ii) it has taken
all necessary action to authorize such execution, delivery and performance; and
(iii) this Agreement constitutes a legal, valid and binding obligation
enforceable against it in accordance with its terms.
(b) Customer is a corporation duly organized and validly existing
under the laws of the State of_____________, it has, or will have at the time of
delivery of any securities as Collateral, the right to grant a first and prior
perfected security interest therein subject to the terms and conditions hereof
and of the Investor CreditLine Agreement;
(c) Customer represents and warrants that the Collateral,
including all securities that may be substituted for or exchanged as Collateral,
will not be subject to any liens or encumbrances other xxxx Xxxxxxx Xxxxx'x
broker's lien arising hereunder in connection with the transactions contemplated
by this Agreement, or pursuant to the Investor CreditLine Agreement (or other
form of securities margin agreement) entered into between Customer and Xxxxxxx
Xxxxx.
(d) all securities included at any time Collateral will be in good
deliverable form (or Custodian shall have the unrestricted power to put such
securities into good deliverable form and will do so upon Xxxxxxx Xxxxx'x
request) in accordance with the requirements of such exchanges or markets as may
be the primary market or markets for such securities;
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(e) Customer has full authority to enter into and perform this
Agreement and the transactions contemplated herein and in the Investor
CreditLine Agreement, and no further actions or approvals by Customer or any
regulatory authority are needed to enable Customer to do so.
(f) no securities delivered by Customer to Xxxxxxx Xxxxx hereunder
have been or shall be obtained, directly or indirectly, from or using the assets
of any Plan (which term means (i) any "employee benefit plan" as defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as amended, or
(ii) any "plan" as defined in Section 4975(e) (1) of the Internal Revenue Code
of 1954, as amended), if Customer or any affiliate of Customer has discretionary
authority or control with respect to the assets of such Plan or renders
investment advice (within the meaning of 29 C.F.R Section 2510.3(c)) with
respect to the investment of the assets of such Plan.
8. Customer and Xxxxxxx Xxxxx hereby constitute and appoint Custodian
as custodian of all monies and securities at any time transferred to Custodian
for deposit in the Special Custody Account in connection with the transactions
contemplated hereby and as their agent for the purposes set forth in this
Agreement.
9. Custodian hereby accepts appointment as custodian and agent and
agrees to establish and maintain a Special Custody Account containing
appropriate records identifying Customer's interest in the Collateral and cash
balances, if any, in said account.
10. Custodian will maintain accounts and records for the Collateral
held in or credited to the Special Custody Account as Xxxxxxx Xxxxx'x agent,
separate from any other property of Customer in the custody of Custodian under
the Custodian Agreement and separate from any other property in which Xxxxxxx
Xxxxx or Custodian has an interest, except that Federal book-entry U.S.
government securities and agency securities may be held in Custodian's account
for the exclusive benefit of customers of Custodian. The Collateral shall at all
times remain the property of Customer subject only to the extent of the interest
and rights therein of Xxxxxxx Xxxxx as the pledgee and secured party thereof
and, except as required to be released hereunder to Xxxxxxx Xxxxx or its
involuntary successors (including a trustee), and shall not be available to
creditors of Xxxxxxx Xxxxx or Custodian.
11. Customer shall be responsible to Xxxxxxx Xxxxx for all obligations
which arise with respect to securities sold short by Customer, which obligations
may include, without limitation, payments or distributions of cash or
securities, or a combination thereof, which result from the declaration of
dividends by the issuers of securities sold short, or by the acquisition,
merger, combination, reorganization or other action taken by or affecting such
issuers.
12. Debit balances, including adjusted debit balances attributable to
Short Sales and Short Sales `against the box,' arising from transactions in
Customer's Securities Account with Xxxxxxx Xxxxx will be charged with interest,
in accordance with Xxxxxxx Xxxxx'x usual custom, including any increases in
rates caused by market conditions and with such charges as Xxxxxxx Xxxxx may
make to cover its facilities and extra services. Xxxxxxx Xxxxx will provide
Customer with a document that sets out in greater detail the terms and
conditions pursuant to which credit will be extended and interest charged to
Customer by Xxxxxxx Xxxxx.
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13. In the event (a) of Customer's Insolvency, or (b) of a default by
Customer of its obligations to provide and maintain Adequate Margin as herein
provided, or (c) that Customer receives notice that Xxxxxxx Xxxxx can no longer
protect Customer's Short Sale and Customer is unable to deliver to Xxxxxxx
Xxxxx, in accordance with applicable laws, rules and regulations and Xxxxxxx
Xxxxx'x internal policies, securities identical to the securities sold short,
Merrill Lynch shall have the right to give notice (which notice may be by
telegraph, facsimile transmission or hand delivery) to Customer specifying such
default or failure to perform or inability to protect, and Xxxxxxx Xxxxx may, no
sooner than 12:00 noon New York Time two business days after notice, if Customer
continues to be in default or remains insolvent (within the meaning of the term
"Customer Insolvency"), or has not performed its requirement to deliver at the
end of such period, convert Customer's convertible securities or exercise
Customer's rights or warrants, buy-in any securities as to which Customer may be
short, sell any Collateral in the Special Custody Account and give Advice to
Custodian to release such Collateral free of payment to Xxxxxxx Xxxxx. Custodian
shall release Collateral free of payment solely upon Advice from Xxxxxxx Xxxxx
signed by an authorized person with respect to Xxxxxxx Xxxxx and expressly
stating that, pursuant to this Agreement, the condition precedent to Xxxxxxx
Xxxxx'x right to receive such Collateral free of payment has occurred. Custodian
will provide immediate telephone notice to Customer followed by written or
telegraphic confirmation, of any receipt by Custodian of Advice from Xxxxxxx
Xxxxx to release Collateral free of payment. Any sales or purchases made
pursuant to this paragraph may be made according to Xxxxxxx Xxxxx'x judgment and
may be made at Xxxxxxx Xxxxx'x 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.
14. As between Custodian, on the one hand, and Xxxxxxx Xxxxx, on the
other, the obligations of Custodian under this Agreement represent obligations
of Custodian generally, rather than obligations of Custodian in any particular
capacity or as a fiduciary with respect to any particular account.
15. Custodian will be paid as consideration for all services it is to
perform pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between Customer and Custodian.
All such compensation will be paid by Customer.
16. In respect to any losses or liabilities, Custodian shall be
protected in acting pursuant to any Instructions, Advices or notices from
Customer or Xxxxxxx Xxxxx reasonably appearing to be genuine and authorized, and
Custodian shall have no duty of further inquiry with respect thereto. Custodian
shall be liable for losses and liabilities for its actions or omissions under
this Agreement only when due to its own negligence or willful misconduct. In
matters concerning or relating to this Agreement, Custodian shall not be
responsible for compliance with any statute or regulation regarding the
establishment or maintenance of margin credit, including but not limited to
Regulation T, or with any rules or regulations of the exchanges or markets for
the securities purchased or sold by Customer. Custodian shall not be liable to
any party for any acts or omissions of the other parties to this Agreement and
shall be indemnified severally by the other parties to this Agreement for any
action taken by Custodian in good faith and without negligence.
17. Any of the parties hereto may terminate this Agreement by notice in
writing to both of the other parties hereto; provided, however, that the status
of any Collateral held at the time of such notice shall not be affected by such
termination until the release of such Collateral pursuant to applicable rules
and regulations of such national securities exchanges of which Xxxxxxx Xxxxx is
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a member, and of Regulation T. In the event Xxxxxxx Xxxxx Advises Custodian to
transfer Collateral from its Special Custody Account to Customer, the Collateral
shall be transferred to the Customer's Custodian Account with Custodian.
18. Written communications hereunder shall be, as required or
authorized herein, hand-delivered, telegraphed or 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 Custodian, to:
Attention:
(b) if to Customer, to:
Attention:
(c) if to Xxxxxxx Xxxxx, to:
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Inc.
Hedge Support Operations Department
000 Xxxxxx Xxxxxx - 0xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Attention: Manager, Prime Brokerage Services
19. This Agreement shall be governed by the laws of the State of New
York applicable to transactions entered into and to be performed wholly within
the State of New York.
[ ]
By: ________________________________
Title: _____________________________
[ ]
By: ________________________________
Title: _____________________________
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
By: ________________________________
Title: _____________________________
11/97
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