MUTUAL FUND CUSTODY AGREEMENT
THIS AGREEMENT is made as of October 16, 1998, by and between The Victory
Variable Insurance Funds, a Delaware business trust (the "Trust"), which may
issue one or series of shares of beneficial interest (each a "Fund"), and Key
Trust Company of Ohio, N.A., a bank chartered under the laws of the United
States, having its principal office at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxx
00000-0000 (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Custodian to serve as the Trust's
custodian and the Custodian is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust, on behalf of each Fund, separately and not
jointly, hereby appoints the Custodian to act as custodian of the securities,
cash and other property of each Fund listed on Attachment A hereto, as it may be
amended from time to time, on the terms set forth in this Agreement. The
Custodian accepts such appointment and agrees to furnish the services herein set
forth in return for the compensation as provided in Paragraph 27 of this
Agreement.
2. Delivery of Documents. The Trust has furnished The Custodian with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Custodian as custodian of the securities, cash and other
property of each Fund of the Trust and approving this Agreement;
(b) Incumbency and signature certificates identifying and containing the
signatures of the Trust's officers and/or the persons authorized to sign Proper
Instructions, as hereinafter defined, on behalf of the Trust;
(c) The Trust's Certificate of Trust filed with the Secretary of State of
the State of Delaware and the Trust's Trust Instrument is filed with the
Secretary of the Trust (such Certificate of Trust and Trust Instrument, as
currently in effect and as they shall from time to time be amended, are herein
together called the "Certificate");
(d) The Trust's Bylaws and all amendments thereto (such Bylaws, as
currently in effect and as they shall from time to time be amended, are herein
called the "Bylaws");
(e) Resolutions of the Trust's Board of Trustees and/or the Trust's
shareholders
approving the Investment Advisory Agreements between the Trust on behalf of
various Funds and Key Asset Management Inc. dated August 28, 1998;
(f) The Administration Agreement between the Trust and BISYS Fund Services
Limited Partnership ("BISYS") dated October 16, 1998;
(g) The Distribution Agreement between the Trust and BISYS dated October
16, 1998;
(h) The Trust's current Registration Statement on Form N-1A under the 1940
Act and the Securities Act of 1933, as amended ("the Securities Act") as filed
with the Securities and Exchange Commission ("SEC"); and
(i) The Trust's most recent prospectuses including all amendments and
supplements thereto (the "Prospectus").
The Trust will furnish the Custodian from time to time with copies of all
amendments of or supplements to the foregoing, if any. The Trust will also
furnish the Custodian with a copy of the opinion of counsel for the Trust with
respect to the validity of the statements issued by the Trust ("Shares") and the
status of such Shares under the Securities Act filed with the SEC, and any other
applicable federal law or regulation.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term "Authorized
Person" means the Trust's President, Vice-President, Treasurer and any other
person, whether or not any such person is an officer or employee of the Trust,
duly authorized by Trustees of the Trust to give Proper Instructions on behalf
of the Trust and the Funds listed on Attachment A which may be amended 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.
(c) "Investment Adviser" means each investment adviser of Funds of the
Trust.
(d) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities, cash, and other property of the
Trust which the Trust may from time to time deposit, or cause to be
deposited, with the Custodian or which the Custodian may from time
to time hold for the Trust;
(ii) all income, dividends, or distributions of any kind in
respect of any other such securities or other property;
(iii) all proceeds of the sales, repurchase, redemptions (or
otherwise)of any of such securities or other property; and
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(iv) all proceeds of the sale of securities issued by the
Trust, which are received by the Custodian from time to time from or
on behalf of the Trust.
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the SEC or its successor or successors and its
nominee or nominees; and shall also mean any other registered clearing agency,
its successor or successors specifically identified in a certified copy of a
resolution of the Trust's Board of Trustees delivered to the Custodian and
specifically approving deposits by the Custodian therein.
(f) "Proper Instructions". Means instructions
(i) delivered by mail; telegram, cable; telex; facsimile
sending device; DTC "ID" or "IID" system or any similar system; and
any Trade Order Entry System acceptable to the parties; and received
by the Mutual Funds Custody Division of the Custodian, signed by two
Authorized Persons or by persons reasonably believed by the
Custodian to be Authorized Persons; or
(ii) transmitted electronically through the Custodian Asset
Management System or any similar electronic instruction system
acceptable to the Custodian; or
(iii) previously agreed to in writing by the Trust and the
Custodian or provided orally by the Trust in form satisfactory to
the Custodian and promptly followed by written instructions signed
by an Authorized Person.
4. Warranties and Representations.
(a) The Trust warrants and represents that:
(i) It is a business trust organized under the laws of
Delaware;
(ii) It is registered as an investment company under the
1940Act; and
(iii) It is duly authorized to enter into this Agreement and
the Agreement is a valid and binding obligation of the Trust.
(b) the Custodian warrants and represents that:
(i) It is a national bank duly organized under the laws of the
United States;
(ii) It is duly authorized to enter into this Agreement and
the Agreement is a valid and binding obligation of the Bank; and
(iii) It is under no regulatory restriction that would
materially affect its
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ability to carry out its obligations under this Agreement.
5. Delivery and Registration of the Property. (a) The Trust will deliver
or cause to be delivered to the Custodian all Property owned by it, at any time
during the period of this Agreement, except for securities and monies to be
delivered to any Subcustodian appointed pursuant to Paragraph 11 hereof. The
Custodian will not be responsible for such securities and such monies until
actually received by it. All securities delivered to the Custodian or to any
such subcustodian (other than in bearer form) shall be registered in the name of
the Trust or in the name of a nominee of the Trust or in the name of the
Custodian or any nominee of the Custodian (with or without indication of
fiduciary status) or in the name of any subcustodian or any nominee of such
subcustodian appointed pursuant to Paragraph 11 hereof or shall be properly
endorsed and in form for transfer satisfactory to the Custodian.
(b) The Custodian shall at all times hold securities of the Trust either:
(i) by physical possession of the share certificates or other instruments
representing such securities in registered or bearer form; or (ii) in the
Book-Entry System, or (iii) in a Securities Depository or (iv) a Sub-Custodian
(as herein defined) of the Custodian.
(c) The Custodian shall at all times hold securities of the Trust in the
name of the Custodian, the Trust or any nominee of either of them, unless
otherwise directed by Proper Instructions; provided that, in any event, all
securities and other assets of the Trust shall be held in an account of the
Custodian containing only the securities and assets of the Trust, or only
securities and assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian shall
indicate at all times the Trust or other customer for which such securities and
other assets are held in such account and the respective interests therein.
6. Voting Rights. It is the Custodian's responsibility to deliver to the
Trust or the Investment Adviser of the relevant Fund, via overnight mail if
necessary, all forms of proxies, all notices of meetings, and any other notices
or announcements materially affecting or relating to securities owned by the
Trust that are received by the Custodian, any Subcustodian (as hereinafter
defined), or any nominee of either of them, and upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or use its best efforts
to cause such Subcustodian or nominee to execute and deliver, such proxies or
other authorizations as may be required. Where warrants, options, tenders or
other securities have fixed expiration dates, the Trust understands that in
order for the Custodian to act, the Custodian must receive the instructions of
the Trust or the Investment Adviser at its offices in Cleveland, addressed as
the Custodian may from time to time request, by no later than noon (Eastern
time) at least one business day prior to the last scheduled date to act with
respect thereto (or such earlier date or time as the Custodian may reasonably
notify the Trust). Absent the Custodian's timely receipt of such instructions,
such instruments will expire without liability to the Custodian.
7. Exercise of Rights; Tender Offers. Upon receipt of Proper Instructions,
the Custodian shall: (a) deliver warrants, puts, calls, rights or similar
securities to the issuer or trustee thereof, or to the agent of such issuer or
trustee, for the purpose of exercise or sale; and
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(b) deposit securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to the Custodian,
or the tendered securities included in the Proper Instructions that are received
in exchange for the tendered securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the Custodian
shall take all action as directed in Proper Instructions to comply with the
terms of all mandatory or compulsory exchanges, calls, tenders, redemptions, or
similar rights of security ownership, and shall promptly notify the Trust or the
Investment Adviser of such action in writing by facsimile transmission or in
such manner as the Trust may designate in writing.
8. Options. Upon receipt of Proper Instructions, the Custodian shall: (a)
receive and retain confirmations or other documents, if any, evidencing the
purchase or writing of an option on a security or securities index by the Trust;
(b) deposit and maintain in a segregated account, securities (either physically
or by book entry in a Securities Depository), cash or other assets; and/or (c)
pay, release and/or transfer such securities, cash, or other assets in
accordance with notices or other communications evidencing the expiration,
termination or exercise of such options furnished by the Options Clearing
Corporation, the securities or options exchange on which such options are traded
or such other organization as may be responsible for handling such option
transactions. The Trust and the broker-dealer shall be responsible for the
sufficiency of assets held in any segregated account established in compliance
with applicable margin maintenance requirements and the performance of other
terms of any option contract, and shall promptly upon notice from the Custodian
bring such accounts into compliance with such terms or requirements.
9. Futures Contracts. Upon receipt of Proper Instructions, the Custodian
shall: (a) receive and retain confirmation, if any, evidencing the purchase or
sale of a futures contract or an option on a futures contract by a Fund; (b)
deposit and maintain in a segregated account, cash, securities and other assets
designated as initial, maintenance or variation "margin" deposits intended to
secure the Trust's performance of its obligations under any futures contracts
purchased or sold or any options on futures contracts written by the Trust,
regarding such margin deposits; and (c) release assets from and/or transfer
assets into such margin accounts only in accordance with any such Proper
Instructions. The Trust shall be responsible for the sufficiency of assets held
in the segregated account in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a futures
contract in accordance with its terms, and shall promptly upon notice act to
bring such accounts into compliance with such terms or requirements.
10. Receipt and Disbursement of Money.
(a) The Custodian shall open and maintain a custody account for the Trust,
and shall hold in such account, subject to the provisions hereof, all cash
received by it from or for the Trust. The Custodian shall make payments of cash
to, or for the account of, the Trust from such cash only (i) for the purchase of
securities for the Trust as provided in paragraph 16 hereof; (ii) upon receipt
of Proper Instructions, for the payment of dividends or for the payment of
interest, taxes, administration, distribution or advisory fees or expenses which
are to be borne by the Trust under the terms of this Agreement, any advisory
agreement, any distribution agreement, or any
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administration agreement; (iii) upon receipt of Proper Instructions for payments
in connection with the conversion, exchange or surrender of securities owned or
subscribed to by the Trust and held by or to be delivered to the Custodian; (iv)
to a subcustodian pursuant to Paragraph 11 hereof; or (v) upon receipt of Proper
Instructions for other corporate purposes.
(b) The Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian for the
Trust.
11. Receipt of Securities.
(a) Except as provided by Paragraph 12 hereof, the Custodian shall hold
all securities and non-cash Property received by it for the Trust. All such
securities and non-cash Property are to be held or disposed of by the Custodian
for the Trust pursuant to the terms of this Agreement. In the absence of Proper
Instructions, the Custodian shall have no power or authority to withdraw,
deliver, assign, hypothecate, pledge or otherwise dispose of any such securities
and non-cash Property, except in accordance with the express terms provided for
in this Agreement. In no case may any trustee, officer, employee or agent of the
Trust, acting as individuals, withdraw any securities or non-cash Property.
12. Subcustodian Agreements. In connection with its duties under this
Agreement, the Custodian may, at its own expense, enter into subcustodian
agreements with other banks or trust companies for the receipt of certain
securities and cash to be held by the Custodian for the account of the Trust
pursuant to this Agreement; provided that each such bank or trust company has an
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less then twenty million dollars ($20,000,000) and that such bank
or trust company agrees with the Custodian to comply with all relevant
provisions of the 1940 Act and applicable rules and regulations thereunder. The
Custodian will be liable for acts or omissions of any such subcustodian.
(a) Promptly after the close of business on each day the Custodian shall
furnish the Trust with system access to review a summary of all transfers to or
from the account of the Trust during said day. Where securities are transferred
to the account of the Trust established at a Securities Depository or the Book
Entry System pursuant to Paragraph 13 hereof, the Custodian shall use the
Securities Depository or Book Entry System to identity as belonging to such
Trust the securities in a commingled group of securities registered in the name
of the Custodian (or its nominee) or shown in the Custodian's account on the
books of a Securities Depository or the Book-Entry System. At least monthly and
from time to time, the Custodian shall furnish the Trust with a detailed
statement of the Property held for the Trust under this Agreement.
(b) Notwithstanding any other provision of this agreement, no provision of
this Section 12, and no provision of this agreement relating to subcustodians,
shall apply to any agreement entered into by the Custodian for the purpose of
facilitating repurchase transactions by the Fund ("Tri-party Agreements"),
except that (i) the indemnification obligations owed to the Custodian by the
Fund and set forth in Sections 28(a) and (b) shall apply to such Tri-party
Agreements without qualification; and (ii) the Fund's rights contained in
Section 30 of this Agreement shall apply to such Tri-party Agreements. All
actions taken by the Custodian in
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connection with such Tri-party Agreements shall be taken solely for the purpose
of providing and accepting instructions at the Fund's request and on the Fund's
behalf.
13. Use of Securities Depository or the Book-Entry System. The Trust shall
deliver to the Custodian a certified resolution of the Board of Trustees of the
Trust approving, authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by Proper Instructions actually
received by the Custodian (i) to deposit in a Securities Depository or the
Book-Entry System all securities of the Trust eligible for deposit therein and
(ii) to utilize a Securities Depository or the Book-Entry System to the extent
possible in connection with the performance of its duties hereunder, including
without limitation settlements of purchases and sales of securities by the
Trust, and deliveries and returns of securities 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 Trust deposited in a Securities
Depository or the Book-Entry System will at all times be segregated from any
assets and cash controlled by the Custodian in other than a fiduciary or
custodial capacity but may be commingled with other assets held in such
capacities. The Custodian will effect payment for securities, in the place where
the transaction is settled, unless the Trust has given the Custodian Proper
Instructions to the contrary.
(b) All Books and records maintained by the Custodian which relate to the
Trust participation in a Securities Depository or the Book-Entry System will at
all times during the Custodian's regular business hours be open to the
inspection of the Trust's duly authorized employees or agents, and the Trust
will be furnished with all information in respect of the services rendered to it
as it may require.
14. Instructions Consistent With The Certificate, etc.
The Custodian shall act only upon Proper Instructions. The Custodian may
assume that any Proper Instructions received hereunder are not in any way
inconsistent with any provision of the Certificate or Bylaws of the Trust or any
vote or resolution of the Trust's Board of Trustees, or any committee thereof.
The Custodian shall be entitled to rely upon any Proper Instructions actually
received by the Custodian pursuant to this Agreement. The Trust agrees that the
Custodian shall incur no liability in acting upon Proper Instructions given to
the Custodian. In accordance with instructions from the Trust, advances of cash
or other Property made by the Custodian, arising from the purchase, sale,
redemption, transfer or other disposition of Property of the Trust, or in
connection with the disbursement of trusts to any party, or in payment of fees,
expenses, claims or liabilities owed to the Custodian by the Trust, or to any
other party which has secured judgment in a court of law against the Trust which
creates an overdraft in the accounts or over-delivery of Property shall be
deemed a loan by the Custodian to the Trust, to the extent permitted under
applicable law. Such loans shall be payable on demand, bearing interest at such
rate customarily charged by the Custodian for similar loans or such other rate
agreed to by the parties. The Trust agrees that test arrangements,
authentication methods or other security devices to be used with respect to
instructions which the Trust may give by telephone, telex, TWX,
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facsimile transmission, bank wire or through an electronic instruction system,
shall be processed in accordance with terms and conditions for the use of such
arrangements, methods or devices as the Custodian may put into effect and modify
from time to time. The Trust shall safeguard any test keys, identification codes
or other security devices which the Custodian makes available to the Trust and
agrees that the Trust shall be responsible for any loss, liability or damage
incurred by the Custodian or by the Trust as a result of the Custodian's acting
in accordance with instructions from any unauthorized person using the proper
security device unless such loss, liability or damage was incurred as a result
of the Custodian's negligence or willful misconduct. The Custodian may
electronically record, but shall not be obligated to so record, any instructions
given by telephone and any other telephone discussions with respect to the
Account. In the event that the Trust uses the Custodian's Asset Management
System, the Trust agrees that the Custodian is not responsible for the
consequences of the failure of that system to perform for any reason, beyond the
reasonable control of the Custodian, or the failure of any communications
carrier, utility, or communications network. In the event that system is
inoperable, the Trust agrees that it will accept the communication of
transaction instructions by telephone, facsimile transmission on equipment
compatible to the Custodian's facsimile receiving equipment or by letter, at no
additional charge to the Trust.
15. Transactions Not Requiring Instructions. The Custodian is authorized
to take the following action without Proper Instructions:
(a) Collection of Income and Other Payments. The Custodian shall:
(i) collect and receive for the account of the Trust, all
income and other payments and distributions, including (without
limitation) stock dividends, rights, warrants and similar items,
included or to be included in the Property of the Trust, and
promptly advise the Trust of such receipt and shall credit such
income, as collected, to the Trust. From time to time, the Custodian
may elect to credit, but shall not be so obligated, the account with
interest, dividends or principal payments on payable or contractual
settlement date, in anticipation of receiving same from a payor,
central depository, broker or other agent employed by the Trust or
the Custodian. Any such crediting and posting shall be at the
Trust's sole risk, and the Custodian shall be authorized to reverse
any such advance posting after making every reasonable attempt to
collect, in the event it does not receive good funds from any such
payor, central depository, broker or agent of the Customer.
(ii) with respect to securities of foreign issue, effect
collection of dividends, interest and other income, and to notify
the Trust of any call for redemption, offer of exchange, right of
subscription, reorganization, or other proceedings materially
affecting such securities, or any default in payments due thereon.
It is understood, however, that the Custodian shall be under no
responsibility for any failure or dealing in effecting such
collections or giving such notice with respect to securities of
foreign issue, regardless of whether or not the relevant information
is published in any financial service available to it unless
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such failure or delay is due to its negligence or willful
misconduct; however, this sub-paragraph (ii) shall not be construed
as creating any such responsibility with respect to securities of
non-foreign issue. Collections of income in foreign currency are, to
the extent possible, to be converted into United States dollars
unless otherwise instructed by Proper Instructions, and in effecting
such conversion the Custodian may use such methods or agencies as it
may see fit. All risk and expenses incident to such collection and
conversion is for the account of the Trust and the Custodian shall
have no responsibility for fluctuations in exchange rates affecting
any such conversion.
(iii) endorse and deposit for collection in the name of the
Trust, checks, drafts, or other orders for the payment of money on
the same day as received;
(iv) receive and hold for the account of the Trust all
securities received by the Trust 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 of the Trust held by
the Custodian hereunder;
(v) 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;
(vi) take any action which in the opinion of the Custodian may
be necessary and proper in connection with the collection and
receipt of such income and other payments and the endorsements for
collection of checks, drafts and other negotiable instruments;
(vii) with respect to domestic securities, to exchange
securities in temporary form for securities in definitive form, to
effect an exchange of the shares where the par value of stock is
changed, and to surrender securities at maturity or when advised of
earlier call for redemption, against payment therefor in accordance
with accepted industry practice. The Trust understands that the
Custodian subscribes to one or more nationally recognized services
that provide information with respect to calls for redemption of
bonds or other corporate actions. The Custodian shall not be liable
for failure to redeem any called bond or take other action if notice
of such call or action was not provided by any service to which it
subscribes provided that the Custodian shall have acted in good
faith without negligence or willful misconduct. The Custodian shall
have no duty to notify the Trust of any rights, duties, limitations,
conditions or other information set forth in any security (including
mandatory or optional put, call and similar provisions), but the
Custodian shall forward to the Trust or the appropriate Investment
Adviser any notices or other documents subsequently received in
regard to any such security. When fractional shares of stock of a
declaring corporation are received as a stock distribution, unless
specifically instructed to the contrary in writing, the Custodian is
authorized to sell the fraction received and credit the Trust's
account. Unless specifically instructed to
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the contrary in writing, the Custodian is authorized to exchange
securities in bearer form for securities in registered form. If any
Property registered in the name of a nominee of the Custodian is
called for partial redemption by the issue of such Property, the
Custodian is authorized to allot the called portion to the
respective beneficial holders of the Property in such manner deemed
to be fair and equitable by the Custodian in its sole discretion.
(b) Deposits of Proceeds of Issuance of Shares. The Custodian shall
collect and receive for the account of the Fund all payments received in payment
for shares of such Fund issued by the Trust.
(c) Redemptions. Upon receipt of notice by the Fund's transfer agent
stating that such transfer agent is required to redeem shares and specifying the
number and class of shares which such transfer agent is required to redeem and
the date and time the request or requests for redemption were received by the
Fund's distributor, the Custodian shall either (i) pay to such transfer agent,
for distribution to the redeeming shareholder, the amount payable to such
shareholder upon the redemption of such shares as determined in the manner
described in the then current Prospectus, or (ii) arrange for the direct payment
of such redemption proceeds by the Custodian to the redeeming shareholder in
accordance with such procedures and controls as are mutually agreed upon from
time to time by and among the Custodian, the Trust and the Trust's transfer
agent.
(d) Miscellaneous Transactions. The Custodian 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
Trust;
(ii) for the exchange of interim receipts or temporary
securities for definitive securities;
(iii) for transfer of securities into the name of the Trust or
the Custodian or a 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 the Custodian.
16. Transactions Requiring Instructions. Upon receipt of Proper
Instructions and not otherwise, the Custodian, directly or through the use of a
Securities Depository or the Book-Entry System, shall:
(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority
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of the Trust as owner of any securities may be exercised;
(b) Deliver any securities held for the Trust against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(c) Deliver any securities held for the Trust 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, against receipt of such certificates or 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 Trust and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Trust;
(e) Release securities belonging to the Trust to any bank or trust company
for the purpose of pledge or hypothecation to secure any loan incurred by the
Trust; and pay such loan upon redelivery to it of the securities pledged or
hypothecated therefore and upon surrender of the note or notes evidencing the
loan;
(f) Deliver any securities held for the Trust upon the exercise of a
covered call option written by the Trust on such securities; and
(g) Deliver securities held for the Trust pursuant to separate security
lending agreements.
(h) Regarding dividends and distributions, the Trust shall furnish the
Custodian with appropriate evidence of action by the Trust's Board of Trustees
declaring and authorizing the payment of any dividends and distributions to the
shareholders of the particular Fund. Upon receipt by the Custodian of Proper
Instructions with respect to dividends and distributions declared by the Trust's
Board of Trustees and payable to the shareholders of the Fund who have elected
in the proper manner to receive their distributions and/or dividends in cash,
and in conformance with procedures mutually agreed upon by the Custodian, the
Trust, and the Trust's transfer agent, the Custodian shall pay to the Trust's
transfer agent, as agent for the shareholders, an amount equal to the amount
indicated in said Proper Instructions as payable by the Trust to such
shareholders for distribution in cash by the transfer agent to such
shareholders. In lieu of paying the Trust's transfer agent cash dividends and
distributions, the Custodian may arrange for the direct payment of cash
dividends and distributions to shareholders by the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time by
and among the Trust, the Custodian and the Trust's transfer agent.
17. Purchase of Securities. Promptly after each purchase of securities,
the Trust or the appropriate Investment Adviser shall deliver to the Custodian
(as Custodian) Proper Instructions specifying with respect to each such
purchase: (a) the name of the issuer and the title
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of the securities, (b) the number of shares of the principal amount purchased
and accrued interest, if any, (c) the dates of purchase and settlement, (d) the
purchase price per unit, (e) the total amount payable upon such purchase, (f)
the name of the person from whom or the broker through whom the purchase was
made and (g) the Fund for which the purchase was made. The Custodian shall upon
receipt of securities purchased by or for the Trust pay out of the moneys held
for the account of such Trust the total amount payable to the person from whom
or the broker through whom the purchase was made, if and only if the same
conforms to the total amount payable as set forth in such Proper Instructions.
18. Sales of Securities. Promptly after each sale of securities, the Trust
or the appropriate Investment Adviser shall deliver to the Custodian Proper
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) the total amount payable to the Trust upon such sale, (f)
the name of the broker through whom or the person to whom the sale was made and
(g) the Fund for which the sale was made. The Custodian shall deliver the
securities upon receipt of the total amount payable to the Trust upon such sale,
if and only if the same conforms to the total amount payable as set forth in
such Proper Instructions.
19. Records. The books and records pertaining to the Trust which are in
the possession of the Custodian shall be the property of the Trust. Such books
and records shall be prepared and maintained as required by the 1940 Act, as
amended; other applicable federal and state securities laws and rules and
regulations; and, any state or federal regulatory body having appropriate
jurisdiction. The Trust, or the Trust's authorized representative, shall have
access to such books and records at all times during the Custodian's normal
business hours, and such books and records shall be surrendered to the Trust
promptly upon request. Upon reasonable request of the Trust, copies of any such
books and records shall be provided by the Custodian to the Trust or the Trust's
authorized representative.
20. Reports. The Custodian shall furnish the Trust the following reports:
(a) such periodic and special reports as the Trustees may reasonably
request;
(b) a monthly statement summarizing all transactions and entries for the
account of each Fund;
(c) a monthly report of Fund securities belonging to each Fund showing the
adjusted amortized cost of the issues and the market value at the end of the
month;
(d) a monthly report of the cash account of each Fund showing
disbursements; and
(e) such other information as may be agreed upon from time to time between
the Trustees and the Custodian.
21. Compliance with Rule 17f-2. The Custodian shall comply with the
requirements of Rule 17f-2 under the 1940 Act and will permit access to the
Fund's securities only in
12
compliance with the requirements of Rule 17f-2.
22. Cooperation with Accountants. The Custodian shall cooperate with the
Trust's independent certified 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 unqualified opinion, including but not limited to the
opinion included in the Trust's semiannual report on the Trust's Form N-SAR.
23. Confidentiality. The Custodian agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the
Trust all records and other information relative to the Trust and its prior,
present or potential Shareholders and relative to the advisors and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where the
Custodian may be 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 Trust. Nothing contained herein,
however, shall prohibit the Custodian from advertising or soliciting the public
generally with respect to other products or services, regardless of whether such
advertisement or solicitation may include prior, present or potential
Shareholders of the Trust provided that, in no event, will any information
obtained as custodian be used in any such solicitation or advertisement.
24. Equipment Failures. In the event of the failure of certain equipment
including but not limited to data processing equipment, telecommunications
equipment, or power generators located at the Custodian, at a designated
Subcustodian or nominee, or at a third party contracted to for certain
securities processing services, the Custodian shall, at no additional expense to
the Trust, take reasonable steps to minimize service interruptions but shall not
have liability with respect thereto. The Custodian shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provision for backup emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
25. Right to Receive Advice.
(a) Advice of Trust. If the Custodian shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall promptly receive,
clarification or advice from the Trust.
(b) Advice of Counsel. If the Custodian shall be in doubt as to any
question of law involved in any action to be taken or omitted by the Custodian,
it may request advice at its own cost from counsel of its own choosing (who may
be counsel for the Trust or the Custodian, at the option of the Custodian).
(c) Conflicting Advice. In case of conflict between directions or advice
received by the Custodian pursuant to subparagraph (a) of this paragraph and
advice received by the Custodian pursuant to subparagraph (b) of this paragraph,
the Custodian shall be entitled to rely on and follow the advice received
pursuant to the latter provision alone.
13
(d) Protection of the Custodian. The Custodian shall be protected in any
action or inaction which it takes or omits to take in reliance on any directions
or advice received pursuant to subparagraph (a) of this section. However,
nothing in this paragraph shall be construed as imposing upon the Custodian any
obligation (i) to seek such directions or advice, or (ii) to act in accordance
with such directions or advice when received. Nothing in this subparagraph shall
excuse the Custodian when an action or omission on the part of the Custodian
constitutes willful misfeasance or negligence by the Custodian of its duties
under this Agreement.
26. Compliance with Governmental Rules and Regulations. The Trust assumes
full responsibility for insuring that the contents of each Prospectus of the
Trust complies with all applicable requirements of the Securities Act, the 1940
Act, and any laws, rules and regulations of governmental authorities having
jurisdiction.
27. Compensation. As compensation for the services described within this
agreement and rendered by the Custodian during the term of this Agreement, the
Trust shall pay to the Custodian the fees provided on Attachment B hereto, as it
may be amended from time to time. In addition, the Trust agrees to reimburse the
Custodian for any out-of-pocket expenses described in Attachment B to this
Agreement, incurred in providing the services contained within this Agreement.
28. Indemnification. (a) The Trust, on behalf of each Fund individually
and not jointly, as sole owner of the Property, agrees, to the extent permitted
by applicable law, to indemnify and hold harmless the Custodian and its nominees
from all taxes, charges, expenses, assessments, claims, and liabilities
(including, without limitation, liabilities arising under the Securities Act,
the Securities Exchange Act of 1934, the 1940 Act, 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) reasonable attorney's 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 the Custodian 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 Trust given
in accordance with the terms of this Agreement, or (ii) upon Proper
Instructions, provided, that neither the Custodian nor any of its nominees or
subcustodian shall be indemnified against any liability to the Trust or to its
Shareholders (or any expenses incident to such liability) (x) arising out of the
Custodian's or such nominee's or subcustodian's own willful misfeasance or
negligence of its duties under this Agreement or any agreement between the
Custodian and any nominee or subcustodian, or (y) constituting any incidental or
consequential damages. In the event of any advance of cash for any purpose made
by the Custodian resulting from Proper Instructions of the Trust, or in the
event that the Custodian or its nominee or subcustodian 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 or subcustodian's own negligence or willful misfeasance,
the Trust shall promptly reimburse the Custodian for such advance of cash or
such taxes, charges, expenses, assessments, claims or liabilities.
(b) Subject to the limitations set forth in this Agreement, the Trust, on
behalf of each
14
Fund individually, and not jointly, agrees to indemnify and hold harmless the
Custodian and its nominees from all loss, damage and expense (including
reasonable attorney's fees) suffered or incurred by the Custodian or its nominee
caused by or arising from actions taken by the Custodian in reliance upon Proper
Instructions; provided, however, that such indemnity shall not apply to (x)
loss, damage or expense occasioned by or resulting from the negligence or
willful misfeasance of the Custodian or its nominee or any material breach of
this Agreement by the Custodian or its nominee or (y) incidental or
consequential damages. In addition, the Trust agrees to indemnify the Custodian
against any liability incurred by reason of taxes assessed to the Custodian, or
other loss, damage or expenses incurred by such person, resulting solely from
the fact that securities and other property of the Trust is registered in the
name of such person; provided, however, that in no event shall such
indemnification be applicable to income, franchise or similar taxes which may be
imposed or assessed against the Custodian.
29. Notice of Litigation, Right to Prosecute. The Custodian shall promptly
inform the Trust in writing of the commencement of any litigation or proceeding
in respect of which indemnity may be sought under the above paragraph 28. The
Trust shall be entitled to participate in any such litigation or proceeding and,
after written notice from the Trust to the Custodian, the Trust may assume the
defense of such litigation or proceeding with counsel of its choice at its own
expense. The Custodian shall not consent to the entry of any judgment or enter
into any settlement in any such litigation or proceeding without providing the
Trust with adequate notice of any such settlement or judgment. The Custodian
shall submit written evidence to the Trust with respect to any cost or expense
for which it is seeking indemnification in such form and detail as the Trust may
reasonably request.
30. Trust's Right to Proceed. Notwithstanding anything to the contrary
contained herein, the Trust shall have, at its election upon reasonable notice
to the Custodian, the right to enforce, to the extent permitted by any
applicable agreement and applicable law, the Custodian's rights against any
Subcustodian or Securities Depository for loss, damage or expense caused the
Custodian or the Trust by such Subcustodian or Securities Depository and shall
be entitled to enforce the rights of the Custodian with respect to any claim
against such Subcustodian or Securities Depository which the Custodian may have
as a consequence of such loss, damage or expense, if and to the extent that the
Trust has not been made whole for any such loss or damage. The Custodian agrees
to cooperate with the Trust and take all actions reasonably requested by the
Trust in connection with the Trust's enforcement of any rights of the Custodian.
The Trust agrees to reimburse the Custodian for all reasonable out-of-pocket
expenses incurred by the Custodian in connection with the fulfillment of its
obligations as long as the Custodian has not otherwise breached the terms of
this Agreement.
31. Responsibility of the Custodian. The Custodian shall not be required
to take any action except as specifically set forth herein. The Custodian shall
be responsible for its own negligent failure or that of any subcustodian it
shall appoint to perform its duties under this Agreement. Without limiting the
generality of the foregoing or of any other provision of this Agreement, the
Custodian 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 advice,
direction, notice or other instrument which
15
conforms to the applicable requirements of this Agreement, if any, and which the
Custodian believes to be genuine, (b) the validity of the issue of any
securities purchased or sold by the Trust, the legality of the purchase or sale
thereof or the propriety of the amount paid or received therefore, (c) the
legality of the issue or sale of any Shares, or the sufficiency of the amount to
be received therefor, (d) the legality of the redemption of any Shares, or the
propriety of the amount to be paid therefore, (e) the legality of the
declaration or payment of any dividend or distribution on Shares, or (f) delays
or errors or loss of data occurring by reason of circumstances beyond the
Custodian's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown (except as provided
in Paragraph 24), flood or catastrophe, acts of God, insurrection, war, riots,
or failure of the mail, transportation, communication or power supply. In no
event will the Custodian be liable for special, indirect or consequential
damages or lost profits or loss of business, which may be suffered by the Trust
or any third party, even if previously informed of the possibility of such
damages.
32. Collection. 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 the Custodian) shall be at the sole risk of the Trust. In any case in
which the Custodian does not receive any payment due the Trust within a
reasonable time after the Custodian has made proper demands for the same, it
shall so notify the Trust in writing, including copies of all demand letters,
any written responses thereto, and memoranda of all oral responses thereto, and
to telephonic demands, and await instructions from the Trust. the Custodian
shall not be obliged to take legal action for collection unless and until
reasonably indemnified to its satisfaction. The Custodian shall also notify the
Trust as soon as reasonably practicable whenever income due on securities is not
collected in due course.
33. Duration and Termination. This Agreement shall be effective as of the
date hereof and shall continue until termination by the Trust or by the
Custodian on 60 day's written notice. Upon any termination of this Agreement,
pending appointment of a successor to the Custodian or a vote of the
Shareholders of the Trust to dissolve or to function without a custodian of its
cash, securities or other property, the Custodian shall not deliver cash,
securities or other property of the Trust to the Trust, but may deliver them to
a bank or trust company designated by the Trust or, failing that, to a bank or
trust company of the Custodian's selection, having 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 successor custodian for the Trust to
be held under terms similar to those of this Agreement, provided, however, that
the Custodian shall not be required to make any such delivery or payment until
full payment shall have been made by the Trust of all liabilities constituting a
charge on or against the properties then held by the Custodian or on or against
the Custodian and until full payment shall have been made to the Custodian of
all of its fee, compensation, costs and expenses, subject to the provisions of
Paragraph 26 of this Agreement. The termination by the Trust of a particular
Series or Fund within the Trust that does not result in the closure of the Trust
does not constitute termination of this Agreement.
16
34. Notices. Notices shall be addressed,
If to the Trust: The Victory Variable Insurance Funds
c/o BISYS Fund Services
0000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000-0000
Attention: President
With a copy to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxx
If to the Custodian: Key Trust Company of Ohio, N.A.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000 -1306
Attention: Division Head
Master Trust Division
or, if the address is 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 three 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 two 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
facsimile sending device charges arising from the sending of a Notice hereunder
shall be paid by the sender.
35. Applicability of Agreement to Funds Individually, not Jointly. The
Trust has entered into this Agreement on behalf of each Fund listed on
Attachment A individually, and not jointly. The rights and obligations of the
Trust described in this Agreement apply to each individual Fund. No Fund shall
have any liability for any costs or expenses incurred by any other Fund. In
seeking to enforce a claim against any Fund, the Custodian shall look to the
assets only of that Fund and not to the assets of any other Fund.
36. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
37. 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.
17
38. Liability of Trustees and Shareholders. A copy of the Certificate of
Trust of the Fund is on file with the Secretary of the State of Delaware, and
notice is hereby given that this instrument is executed on behalf of the
trustees of the Fund as trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
39. Miscellaneous. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the parties hereto. 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 New York and governed by New York 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 upon 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 as of the day and year first
above written.
KEY TRUST COMPANY OF OHIO, N.A.
Attest: /s/ Xxxxxxxx Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------- ------------------------------
Name: Xxxxxxxx Xxxxxxxx Name: Xxxxxxx X. Xxxxxxxx
Title: A.V.P. Vice President
THE VICTORY VARIABLE INSURANCE FUNDS,
on behalf of each Fund listed on
Attachment A, individually and not
jointly
Attest: /s/ Xxxxxx X. Xxxx By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------- ------------------------------
Name: Xxxxxx X. Xxxx Name: Xxxxxxx X. Xxxxxxxx
Title: Assistant Secretary Title: Secretary
18
ATTACHMENT A
To the Amended and Restated Mutual Fund Custody Agreement dated October 16,
1998
Between The Victory Variable Insurance Funds and Key Trust Company of Ohio,
N.A.
NAME OF FUND
o Diversified Stock Fund
o Small Company Opportunity Fund
Revised: April 27, 2000
ATTACHMENT B
Custody Service Fees
For the services as described in this Agreement, each Fund of the Trust listed
on Attachment A hereto shall pay a custody safekeeping fee and custody
transaction fees as follows:
Domestic Custody Safekeeping Fees
o .018% (1.8 Basis Points) on the assets of the Funds
Domestic Custody Transaction Fees
o $15.00 per DTC or Fed Book Entry transaction
o $25.00 per physical transaction
o $40.00 per future or option wire
o $15.00 per Government Paydown
o $ 8.00 per wire transfer
Global Custody Safekeeping Fees
o .15% on first $250,000,00 in assets per Fund
o .12% on assets in excess of $250,000,000 per Fund
Global Custody Transaction Fees (by Country)
GROUP I GROUP II
------------------------------------------------
Austria Australia
Belgium Canada
Denmark France
Finland Hong Kong
Germany Italy
Japan Netherlands
Norway Singapore/Malaysia
Sweden Spain
Switzerland United Kingdom
CEDEL/Euroclear Other Fixed Income
Eligible Fixed Income
------------------------------------------------
$40.00 per transaction $80.00 per transaction
