Document:

Exhibit 10.1

 

EXECUTION COPY

 

ADMINISTRATIVE AGENCY AGREEMENT

 

THIS ADMINISTRATIVE AGENCY
AGREEMENT (the “Agreement”) is made as of April 8,
2008, by and among BROWN BROTHERS HARRIMAN &
CO., a limited partnership organized under the laws of the State of
New York (the “Administrator”), AIRSHARESTM EU CARBON ALLOWANCES FUND, a
commodity pool formed as a Delaware statutory trust (the “Fund”), and XSHARES ADVISORS LLC, a Delaware limited liability company and
the Sponsor of the Fund (the “Sponsor”).

 

WITNESSETH:

 

WHEREAS, the Fund is a Delaware statutory trust that
is registered as a commodity pool;

 

WHEREAS, the Sponsor will serve as the commodity pool
operator of the Fund and manage the business and affairs of the Fund;

 

WHEREAS, the Fund and the Sponsor desire to retain
the Administrator to render certain services to the Fund and the Sponsor and
the Administrator is willing to render such services.

 

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto agree as follows:

 

1.             Appointment
of Administrator. The
Fund and the Sponsor hereby employ and appoint the Administrator to act as
administrative agent on the terms set forth in this Agreement, and the
Administrator accepts such appointment.

 

2.             Delivery
of Documents. The Fund
and/or the Sponsor will on a continuing basis provide the Administrator with:

 

2.1           a
copy of the Fund’s most recent Registration Statement on Form S-1 (the “Registration Statement”) under the
Securities Act of 1933, as amended;

 

2.2           copies
of all material agreements between the Fund and its service providers,
including without limitation, advisory, distribution and administration
agreements;

 

2.3           a
copy of the Fund’s valuation procedures;

 

2.4           a
copy of the Fund’s Amended and Restated Declaration of Trust and Trust
Agreement, as may be amended from time to time;

 

2.5           a
copy of the Fund’s Deed of Trust (the “Deed
of Trust”) between the Sponsor and Wilmington Trust Company;

 

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2.6           a
copy of the Authorized Participant Agreement, as may be amended from time to
time;

 

2.7           any
other documents (including, but not limited to, directions of the Fund’s
Trustee) which relate to or affect the Administrator’s performance of its
duties hereunder which the Administrator may at any time reasonably request;
and

 

2.8           copies
of any and all amendments or supplements to the foregoing.

 

3.             Duties as
Administrator. Subject
to the supervision and direction of the Sponsor, the Administrator will perform
the administrative services described in Appendix A hereto. Additional services
may be provided by the Administrator upon the request of the Fund and/or the
Sponsor as mutually agreed upon from time to time. In performing its duties and
obligations hereunder, the Administrator will act in accordance with the
Sponsor’s instructions as defined in Section 5 (“Instructions”). It is
agreed and understood that the Administrator shall not be responsible for the
Fund’s or the Sponsor’s compliance with any applicable documents, laws or
regulations, or for losses, costs or expenses arising out of the Fund’s or the
Sponsor’s failure to comply with said documents, laws or regulations or the
Fund’s or the Sponsor’s failure or inability to correct any non-compliance
therewith. The Administrator shall in no event be required to take any action,
which is in contravention of any applicable law, rule or regulation or any
order or judgment of any court of competent jurisdiction.

 

3.1           Records. The Administrator will maintain and retain
such records as required by the Securities Exchange Act of 1934, as amended,
the Rules of the New York Stock Exchange (the “NYSE”), 17 C.F.R 4.23 (specifically, the records specified in
17 C.F.R. 4.23(a)(1) through (8), (10) and (12) and (b)(1), and other
applicable federal securities laws and created pursuant to the performance of
the Administrator’s obligations under this Agreement. The Administrator shall
not be responsible for maintaining and retaining, or for the accuracy and
completeness of, any records not created by the Administrator. The
Administrator acknowledges that the records maintained and preserved by the
Administrator pursuant to this Agreement are the property of the Fund and/or
the Sponsor and will be, at the Fund’s and/or the Sponsor’s expense, surrendered
promptly upon reasonable request. In performing its obligations under this
Section, the Administrator may utilize micrographic and electronic storage
media as well as independent third party storage facilities.

 

4.             Duties of
the Fund and/or the Sponsor.
The Fund and/or the Sponsor shall notify the Administrator as promptly as
reasonably practicable of any matter within their knowledge materially
affecting the performance by the Administrator of its services under this
Agreement. Where the Administrator is providing fund accounting services
pursuant to this Agreement, the Fund and/or the Sponsor shall as promptly as

 

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reasonably
practicable notify the Administrator as to the accrual of liabilities of the
Fund and of liabilities of the Fund not appearing on the books of account kept
by the Administrator, as well as to the existence, status and proper treatment
of reserves, if any, authorized by the Fund. Each of the Fund and the Sponsor
agree to provide such information in its possession or which it may obtain
without the expenditure of undue time and expense to the Administrator as may
be requested under the banking and securities laws of the United States or
other jurisdictions relating to “Know Your Customer” and money laundering
prevention rules and regulations (collectively, the “KYC Requirements.  Each of  the
Fund and the Sponsor further represents that it will perform the obligations
required under applicable KYC Requirements (in the case of the Sponsor, such
requirements as apply to investment advisers as such with the Securities and
Exchange Commission) with respect to the Fund’s “customers”, including
Authorized Participants (as defined in the Registration Statement).

 

5.                                       Instructions.

 

5.1           The Administrator shall not be liable for,
and shall be indemnified by the Fund and the Sponsor against, any and all
losses, costs, damages or expenses arising from or as a result of, any action
taken or omitted in reliance upon Instructions or upon any other written
notice, request, direction, instruction, certificate or other instrument
believed by it to be genuine and signed or authorized by the proper party or
parties. A list of persons so authorized by the Fund and/or the Sponsor (“Authorized
Persons”) is attached hereto as Appendix B and upon which the Administrator may
rely until its receipt of notification to the contrary by the Fund and/or the
Sponsor.

 

5.2           Instructions
shall include a written request, direction, instruction or certification signed
or initialed on behalf of the Fund and/or the Sponsor by one or more Authorized
Persons.

 

5.3           Telephonic
or other oral instructions or instructions given by telefax transmission may be
given by any one of the above Authorized Persons and will also be considered
Instructions if the Administrator reasonably believes them to have been given
by a person authorized to give such Instructions with respect to the
transaction involved.

 

5.4           With
respect to telefax transmissions, the Fund and the Sponsor hereby acknowledge
that (i) receipt of legible instructions cannot be assured, (ii) the
Administrator cannot verify that authorized signatures on telefax instructions
are original, and (iii) the Administrator shall not be responsible for
losses or expenses incurred through actions taken in reliance on such telefax
instructions. The Fund and the Sponsor agree that such telefax instructions
shall be conclusive evidence of the Fund’s and/or the Sponsor’s Instruction to
the Administrator to act or to omit to act.

 

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5.5           Instructions
given orally will not be confirmed in writing and the lack of such confirmation
shall in no way affect any action taken by the Administrator in reliance upon
such oral Instructions. The Fund and the Sponsor authorize the Administrator to
tape record any and all telephonic or other oral Instructions given to the
Administrator by or on behalf of the Fund and/or the Sponsor (including the
Fund’s Sponsor or any person or entity with similar responsibilities which is
authorized to give Instructions on behalf of the Fund and/or the Sponsor to the
Administrator.)

 

6.             Expenses
and Compensation. For
the services to be rendered and the facilities to be furnished by the
Administrator as provided for in this Agreement, the Fund and/or the Sponsor
shall pay the Administrator pursuant to this Agreement a fee based on such fee
schedule as may from time to time be agreed upon in writing among the Fund, the
Sponsor and the Administrator. Additional services performed by the
Administrator as requested by the Fund and/or the Sponsor shall be subject to
additional fees as mutually agreed upon from time to time among the Fund, the
Sponsor and the Administrator. In addition to any such fees, the Administrator
shall bill the Fund separately for any out-of-pocket disbursements of the
Administrator based on an out-of-pocket disbursement schedule as may from time
to time be agreed upon in writing among the Fund, the Sponsor and the
Administrator. The initial fee schedule and out of pocket disbursement schedule
are attached as Appendix D to this Agreement. The foregoing fees and
disbursements shall be billed to the Fund by the Administrator and shall be
paid as promptly as reasonably practicable by wire transfer or other
appropriate means to the Administrator.

 

7.             Standard
of Care. The Administrator
shall be held to the exercise of reasonable care and diligence in carrying out
the provisions of this Agreement, provided that the Administrator shall not
thereby be required to take any action which is in contravention of any
applicable law, rule or regulation or any order or judgment of any court
of competent jurisdiction.

 

8.             General
Limitations on Liability.
So long as the Administrator has and complies with an appropriate business continuity
plan, the Administrator shall incur no liability with respect to any
telecommunications, equipment or power failures, or any failures to perform or
delays in performance by postal or courier services or third-party information
providers (including, without limitation, those listed on Appendix C).

 

8.1           So
long as the Administrator has and complies with an appropriate business
continuity plan, the Administrator shall also incur no liability under this
Agreement if the Administrator or any agent or entity utilized by the
Administrator shall be prevented, forbidden or delayed from performing, or 

 

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omits to perform, any act or thing which this
Agreement provides shall be performed or omitted to be performed, by reason of
causes or events beyond its control, including but not limited to:

 

8.1.1        any Sovereign Event. A “Sovereign Event” shall mean any
nationalization; expropriation; devaluation; revaluation; confiscation;
seizure; cancellation; destruction; strike; act of war, terrorism, insurrection
or revolution; or any other act or event beyond the Administrator’s control;

 

8.1.2        any provision of any present or future law, regulation or order of the
United States or any state thereof, or of any foreign country or political
subdivision thereof, or of any securities depository or clearing agency; and

 

8.1.3        any provision of any order or judgment of any court of competent
jurisdiction.

 

8.2     The
Administrator shall not be held accountable or liable for any losses, damages
or expenses the Fund, the Sponsor, the Commodity Trading Advisor (as defined in
the Registration Statement), the Commodity Broker (as defined in the
Registration Statement), any Authorized Participant or former Authorized
Participant of the Fund or any other person may suffer or incur arising from
acts, omissions, errors or delays of the Administrator in the performance of
its obligations and duties as provided in Section 3 hereof, including
without limitation any error of judgment or mistake of law, except a loss,
damage or expense resulting from the Administrator’s willful malfeasance, bad
faith or negligence in the performance of such Administrator’s obligations and
duties.

 

9.                                       Specific
Limitations on Liability. In
addition to, and without limiting the application of the general limitations on
liability contained in Section 8 above, the following specific limitations
on the Administrator’s liability shall apply to the particular administrative
services set forth on Appendix A hereto.

 

9.1           Liability for Fund Accounting Services. Without limiting the provisions in Section 8
hereof, the Administrator’s liability for acts, omissions, errors or delays
relating to its fund accounting obligations and duties shall be limited to the
amount of any expenses associated with a required recalculation of net asset
value per unit (“NAV”) and any direct damages suffered by any Authorized
Participant in connection with such recalculation. The Administrator’s
liability or accountability for such acts, omissions, errors or delays shall be
further subject to clauses 9.1.1 through 9.1.3 below.

 

9.1.1        The parties hereto acknowledge that the Administrator’s causing an
error or delay in the determination of NAV may, but does not in and of itself,
constitute negligence or

 

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reckless or willful misconduct. The parties further
acknowledge that, in accordance with industry practice, the liability of the
Administrator for fund accounting services shall accrue and the recalculation
of NAV shall be performed in accordance with this Section 9.1 only with
regard to material errors in the calculation of the NAV that are (i) greater
than or equal to $.01 per unit of the Fund and (ii) greater than or equal
to 1⁄2% of the total net assets of the Fund. If a recalculation of NAV occurs,
the parties hereto agree to reprocess transactions or take such other action(s) so
as to eliminate or minimize to the extent possible the liability of the
Administrator.

 

9.1.2        The Administrator shall not be held accountable or liable to the Fund,
the Sponsor, the Commodity Trading Advisor, the Commodity Broker, any
Authorized Participant or former Authorized Participant of the Fund or any
other person for any delays or losses, damages or expenses any of them may
suffer or incur resulting from (i) the Administrator’s failure to receive
timely and suitable notification concerning quotations or corporate actions
relating to or affecting portfolio securities of the Fund; or (ii) any
errors in the computation of NAV based upon or arising out of quotations or
information as to corporate actions if received by the Administrator either (a) from
a source which the Administrator was authorized to rely upon (including those
sources listed on Appendix C), or (b) from a source which in the
Administrator’s reasonable judgment was as reliable a source for such
quotations or information as such authorized sources; or (iii) any errors
in the computation of NAV as a result of relevant information known to the
Sponsor, the Fund, a futures commission merchant, an executing broker, or any
of the Fund’s other service providers including the Commodity Broker or the
Commodity Trading Advisor, which would materially impact the calculation of NAV
(pursuant to the standard described in the second sentence of Section 9.1.1
above), but was not communicated to the Administrator. To the extent that Fund
assets are not in the custody of the Administrator or any of its affiliates,
the Administrator may conclusively rely on any reporting in connection with
such assets provided to the Administrator by a third party on behalf of the
Fund, including, without limitation the Sponsor, the Commodity Broker, the
Commodity Trading Advisor and any executing broker or futures commission
merchant.

 

9.1.3        In the event of any error or delay in the determination of such NAV for
which the Administrator may be liable, the Fund, the Sponsor and the
Administrator will consult and make good faith efforts to reach agreement on
what actions should be taken in order to mitigate any loss suffered by the Fund
or its present or former Authorized Participants in order that the Administrator’s
exposure to liability shall be reduced to the 

 

6

 

extent possible after taking into account all
relevant factors and alternatives; provided, however, that the Fund and the
Sponsor shall not be obligated to take any action that would in any way limit
or conflict with the Sponsor’s or the Fund’s fiduciary duties under Delaware
law. It is understood that in attempting to reach agreement on the actions to
be taken or the amount of the loss which should appropriately be borne by the
Administrator, the Fund, the Sponsor and the Administrator will consider all
relevant factors, including as appropriate but not limited to, the amount of
the loss involved, the Fund’s desire to avoid loss of Authorized Participant
goodwill,  the fact that other
persons or entities could have been reasonably expected to have detected the
error sooner than the time it was actually discovered, the appropriateness of
limiting or eliminating the benefit which Authorized Participants or former
Authorized Participants might have obtained by reason of the error, and the
possibility that other parties providing services to the Fund might be induced
to absorb a portion of the loss incurred.

 

10.                                 Indemnification.

 

The Fund and the Sponsor hereby agree to indemnify
and hold harmless the Administrator, its partners, stockholders, members,
directors, officers and employees and any subsidiary or affiliate of the
foregoing (“Affiliate”), and the successors and assigns of all of the foregoing
persons, against any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any act,
omission, error or delay or any claim, demand, action or suit, in connection
with or arising out of performance of its obligations and duties under this
Agreement, not resulting from the willful malfeasance, bad faith or negligence
of the Administrator or any of its affiliates in the performance of such
obligations and duties. The provisions of this Section 10 shall survive
the termination of this Agreement.

 

11.           Reliance
by the Administrator on Opinions of Counsel and Opinions of Certified Public
Accountants.

 

The Administrator may consult with its counsel or
the Fund’s counsel in any case where so doing appears to the Administrator to
be necessary or desirable. The Administrator shall not be considered to have
engaged in any misconduct or to have acted negligently and shall be without
liability in acting upon the advice of its counsel or of the Fund’s counsel.

 

The Administrator may consult with a certified
public accountant or the Fund’s Treasurer (or persons performing such function)
in any case where so doing appears to the Administrator to be necessary or
desirable. The Administrator shall not be considered to have engaged in any
misconduct or to have acted 

 

7

 

negligently
and shall be without liability in acting upon the advice of such certified
public accountant or of the Fund’s Treasurer or persons performing such
function.

 

12.           Termination
of Agreement. This
Agreement may be terminated by any of the parties in accordance with the
provisions of this Section 12.

 

12.1         This
Agreement shall have an initial term of three (3) years from the date
hereof. Thereafter, this Agreement shall automatically renew for successive one
(1) year periods unless any party terminates this Agreement by written
notice effective no sooner than seventy-five (75) days following the date that
notice to such effect shall be delivered to the other parties at their address
set forth herein. Notwithstanding the foregoing provisions, any party may
terminate this Agreement at any time (a) for cause, which is a material
breach of the Agreement not cured within sixty (60) days of written notice of
such breach, in which case termination shall be effective upon receipt of
written notice by the non-terminating parties, or (b) upon thirty (30)
days’ written notice to the other parties in the event that a party is adjudged
bankrupt or insolvent, or there shall be commenced against such party a case
under any applicable bankruptcy, insolvency, or other similar law now or
hereafter in effect. In the event a termination notice is given by a party
hereto, all expenses associated with the movement of records and materials and
the conversion thereof shall be paid by the Fund and/or the Sponsor for which
services shall cease to be performed hereunder. The Administrator shall be
responsible for completing all actions in progress when such termination notice
is given unless otherwise agreed in writing.

 

12.2.        Upon
termination of this Agreement in accordance with this Section 12, the Fund
and/or the Sponsor may request the Administrator to promptly deliver to the
Fund, the Sponsor or to any designated third party all records created and
maintained by the Administrator pursuant to Section 3.1 of this Agreement,
as well as any Fund records maintained but not created by the Administrator. If
such request is provided in writing by the Fund or the Sponsor to the
Administrator within seventy-five (75) days of the date of termination of the
Agreement, the Administrator shall provide to the Fund or the Sponsor a certification
that all records created by the Administrator pursuant to its obligations under
Section 3.1 of this Agreement are accurate and complete. After
seventy-five (75) days of the date of termination of this Agreement, no such
certification will be provided to the Fund or the Sponsor by the Administrator
and the Administrator is under no further obligation to ensure that records
created and maintained by the Administrator pursuant to Section 3.1 of
this Agreement are maintained in a form that is accurate or complete.

 

8

 

13.           Confidentiality
and Privacy.

 

Subject to the legal obligations of the Fund or the
Sponsor (including those obligations arising by virtue of the legal status of
either), the parties hereto agree that each shall treat confidentially the
terms and conditions of this Agreement and all information provided by each
party to the other regarding its business and operations. All confidential
information provided by a party hereto shall be used by any other party hereto
solely for the purpose of rendering or obtaining services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is
publicly available when provided or thereafter becomes publicly available other
than through a breach of this Agreement, or that is required to be disclosed by
or to any regulatory authority, any auditor of the parties hereto, or by
judicial or administrative process or otherwise by applicable law.

 

14.           Tape-recording. The parties consent to recording of any and
all telephonic or other oral instructions. This authorization will remain in
effect until and unless revoked by the Fund, the Sponsor or the Administrator
in writing. Each party further agrees to solicit valid written or other consent
from any of its employees, officers, directors or agents with respect to
telephone communications to the extent such consent is required by applicable
law.

 

15.         Procedures. To the extent not specified herein or in the
Registration Statement or Deed of Trust, the procedures applicable to the
Administrator’s services to be performed hereunder may be established from time
to time by agreement among the Fund, the Sponsor and the Administrator. The
Administrator shall have the right to utilize any shareholder accounting and
recordkeeping systems that, in its opinion, enables it to perform any services
to be performed hereunder.

 

16.           Entire
Agreement;  Amendment. This
Agreement constitutes the entire understanding and agreement of the parties
hereto and supersedes any other oral or written agreements heretofore in effect
between the parties with respect to the subject matter hereof. No provision of
this Agreement may be amended or terminated except by a statement in writing
signed by the party against which enforcement of the amendment or termination
is sought.

 

17.           Severability.
In the event any
provision of this Agreement is determined to be void or unenforceable, such
determination shall not affect the remainder of this Agreement, which shall
continue to be in force.

 

9

 

18.           Headings. The section headings in this Agreement are
for the convenience of reference only and shall not modify, define, expand or
limit any of the terms or provisions thereof.

 

19.           Governing
Law.
This Agreement shall be
governed by and construed according to the laws of the State of New York
without giving effect to conflicts of law provisions thereof and each of the
parties hereto irrevocably consents to the exclusive jurisdiction of the United
States District Court for the Southern District of New York or if that court
lacks or declines to exercise subject matter jurisdiction, the Supreme Court of
the State of New York, New York County. Each of the Fund and the Sponsor
irrevocably waives any objection it may now or hereafter have to the laying of
venue of any action or proceeding in any of the aforesaid courts and any claim
that any such action or proceeding has been brought in an inconvenient forum. Furthermore,
each party hereto irrevocably waives any right that it may have to trial by
jury in any action, proceeding or counterclaim arising out of or related to
this Agreement or the services contemplated hereby.

 

20.           Notices. Notices and other writings delivered or
mailed postage prepaid to the Fund and/or the Sponsor shall be addressed to the
Fund and/or the Sponsor at 420 Lexington Avenue, New York New York 10170,
Attn.: Chief Operating Officer, or such other address as the Fund and/or the
Sponsor may have designated to the Administrator in writing, or to the
Administrator at 40 Water Street, Boston, MA 
02109, Attention: Manager, Fund Administration Department, or to such
other address as the Administrator may have designated to the Fund and/or the
Sponsor in writing, shall be deemed to have been properly delivered or given
hereunder to the respective addressee.

 

21.           Binding
Effect;  Assignment. This
Agreement shall be binding upon and inure to the benefit of the Fund, the
Sponsor and the Administrator and their respective successors and assigns,
provided that no party hereto may assign this Agreement or any of its rights or
obligations hereunder without the written consent of the other parties hereto. Each
party agrees that only the parties to this Agreement and/or their successors in
interest shall have a right to enforce the terms of this Agreement. Accordingly,
no customer of the Fund, including any Authorized Participant or any other
third party, shall have any rights under this Agreement and such rights are
explicitly disclaimed by the parties hereto.

 

22.           Counterparts. This Agreement may be executed in any number
of counterparts each of which shall be deemed to be an original. This Agreement
shall become effective when one or more counterparts have been signed and
delivered by each of the parties hereto. A photocopy or telefax of this
Agreement shall be acceptable evidence of the existence of this Agreement and
the Administrator shall be protected in relying on the photocopy or telefax
until the Administrator has received the original of this Agreement.

 

10

 

23.           Exclusivity. The services furnished by the Administrator
hereunder are not to be deemed exclusive, and the Administrator shall be free
to furnish similar services to others.

 

24.           Authorization.
The Fund hereby
represents and warrants that the Trustee has authorized the execution and delivery
of this Agreement and that Authorized Persons of the Fund have signed this
Agreement and Appendices A, B, C and D hereto.

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their duly authorized officers
as of the date first written above.

 

The
undersigned acknowledges that (I/we) have received a copy of this document.

 

 

BROWN
BROTHERS HARRIMAN & CO.

 

 

	
  By:

  	
  /s/ Timothy J. Connelly

  	
   

  
	
   

  	
  Name: Timothy J. Connelly

  
	
   

  	
  Title: Partner

  
	
   

  	
  Date:
  4-8-08

  

 

AIRSHARESTM EU CARBON ALLOWANCES FUND

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date:
  4-8-08

  

 

XSHARES ADVISORS LLC

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date:
  4-8-08

  

 

11

 

APPENDIX A

TO
ADMINISTRATIVE AGENCY AGREEMENT

 

ADMINISTRATIVE
SERVICES OF THE ADMINISTRATIVE AGENT

Dated as of                     

 

Fund Accounting
Services

 

The Administrator will provide the following fund
accounting services to the Fund on any Business Day: transaction processing and
review, custodial reconciliation, securities pricing and investment accounting.

 

Transaction Processing and Review. The Administrator shall input and reconcile
the Fund’s investment activity including with respect to:

 

·      Investment taxlots

·      Income

·      Dividends

·      Principal paydowns

·      Capital activity

·      Expense accruals

·      Cash activity

·      Corporate Reorganizations

 

Custodial Reconciliation. The Administrator shall reconcile the
following positions of the Fund against the records of the Custodian:

 

·      Securities, Futures and Over-the-Counter Contract (“OTC”) holdings

·      Cash including cash transfers, fees assessed and other investment
related cash transactions

·      Trade settlements

 

Securities, Futures and OTC Valuation. Using the Valuation Procedures set forth in
Appendix D, the Administrator shall update each security, Futures and OTC
position of the Fund as to the following:

 

·      Market prices obtained from approved sources including those listed on
Appendix C or Fair Valuations obtained from an Authorized Person of the Fund or
the Sponsor

·      Mark to market of non-base
receivables/payables utilizing approved foreign exchange quotations as quoted
in Appendix C

·      Mark to market of non-base currency positions
utilizing the approved sources quoted in Appendix C or Fair Valuations obtained
from an Authorized Person of the Fund or the Sponsor

 

Investment Accounting. The Administrator shall provide the
following investment accounting services to each Portfolio:

 

·      Amortization/accretion at the individual tax
lot level

·      General ledger entries

·      Book value calculations

·      Trade Date + 1 accounting

·      Calculation of Net Asset Value Per Unit (“NAV”)
as of the earlier of 4:00 p.m. New York time or the close of trading on
the NYSE, and published shortly after the close of trading on the NYSE

 

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NAV Reporting. The Administrator shall communicate the
Fund’s ETF Net Asset Value information with respect to:

 

i.      PLF A (ETF NAV summary data including Fund Net Assets, NAV/share,
NAV/creation, Basket market value (if applicable), actual cash component (if
applicable), and estimated cash component (if applicable)) if required by NSCC,
the Exchange, or the Funds Distributor.

ii.     PLF B (ETF security basket reporting) if required by NSCC, the
Exchange, or the Funds Distributor.

iii.    ETF Fund Holding File/Report if required by the Funds Distributor.

 

Financial
Reporting Services

 

•      The
Administrator shall accumulate information for and prepare

 

·      Within a 30 day period following the end of the Fund’s required monthly
reporting period, an Account Statement in compliance with the requirements of
Commodity Futures Trading Commission (“CFTC”) Rule §4.22(a), including a
Statement of Income (Loss) and a Statement of Changes in Net Asset Value; such
preparation includes the coordination and review of all printer and author
edits. The Fund or the Sponsor shall make arrangements for the printing and
mailing of the Account Statements.

 

·      Within a 45 day production cycle, or shorter time period as required by
the U.S. Securities and Exchange Commission (the “SEC”) and communicated to the Administrator by the Fund or the
Sponsor, one first fiscal quarter report of the Fund, one second fiscal quarter
report of the Fund and one third fiscal quarter report of the Fund, each on a
Quarterly Report on Form 10-Q.

 

·      Within a 90 day production cycle, or shorter time period as required by
the SEC and communicated to the Administrator by the Fund or the Sponsor, one
annual report of the Fund on an Annual Report on Form 10-K per fiscal
year; such preparation includes the coordination of all printer and author
edits, the review of printer drafts and the coordination of the audit of the
Fund by its independent public accountant (e.g., manage open items lists, host
weekly audit meeting, etc.). The Fund or the Sponsor shall make arrangements
for the printing and mailing of the Annual Report on Form 10-K.

 

·      Within 90 days after the end of the Fund’s fiscal year, an Annual
Report of the Fund in compliance with the requirements of CFTC Rule §4.22(c);
such preparation includes the coordination of all printer and author edits, the
review of printer drafts and the coordination of the audit of the Fund by its
independent public accountant (e.g., manage open items lists, host weekly audit
meeting, etc.). The Fund or the Sponsor shall make arrangements for the
printing and mailing of the Annual Report.

 

·      Upon review and approval of each above-mentioned report by the Sponsor’s
Treasurer and/or Chief Financial Officer (or such person performing such
functions), the Administrator shall Edgarize and file such reports with the
SEC, CFTC and/or NFA, as required, including any applicable executive officer
certifications or other exhibits to such reports.

 

The Administrator shall assist the Fund and/or the
Sponsor in preparing Fund press releases with respect to interim statements and
quarterly results and transmitting such press releases to the NYSE and such
other entities as requested by the Fund and/or the Sponsor.

 

13

 

Assistant
Treasurer Services

 

The Administrator shall perform the following
services as requested by the Sponsor’s Treasurer (or person performing such
function):

 

·      Prepare and obtain authorization of Fund expense invoices on a
bi-monthly basis

·      Prepare the Fund’s quarterly budget and make recommendations for
adjustments as appropriate

·      Prepare a monthly expense pro forma for the Fund

·      Provide consultative services with respect to financial matters of the
Fund as may be requested and agreed to among the Fund, the Sponsor and the
Administrator from time to time

 

Corporate
Secretarial Services

 

The Administrator shall perform the following
corporate secretarial services:

 

·      Provide an “Assistant Secretary” who may be approved as an officer of
the Fund by the Board of Trustees or Directors or a similar body (the “Board”)

·      Maintain a calendar for Board and, to the extent applicable, Audit
Committee, Nominating/Governance Committee and Compensation Committee
matters/approvals in the form of Exhibit A

·      Prepare quarterly Board and, to the extent applicable, Audit Committee,
Nominating/Governance Committee and Compensation Committee meeting materials,
including notices, scripts, agendas, resolutions, memoranda, minutes, and mail
the materials to the Board, committee members and such other persons as
instructed by the Fund or the Sponsor

·      Attend quarterly Board and Audit Committee meetings and annual meetings
of the Nominating/Governance Committee and Compensation Committee, take minutes
of the meetings, make presentations as required and follow up on matters raised
at the meetings. In the event that the Administrator is asked to perform
secretarial services for more than four quarterly Board or Audit Committee
meetings per calendar year or more than one Nominating/Governance Committee or
Compensation Committee meeting per calendar year, the Fund will be assessed
special meeting fees. Fees may range between $2,500 and $10,000 per meeting,
depending upon the complexity of the meeting materials and discussion and the
location of the meeting. Out-of-pocket expenses associated with the production
and mailing of all Board and committee meeting materials, as well as travel
expenses associated with in-person attendance at meetings, will be charged to
the Fund

·      Prepare the annual Directors/Trustees and officers questionnaires and
distribute the questionnaires to the Directors/Trustees and officers of the
Sponsor

 

Regulatory
Support Services

 

The Administrator shall perform the following
regulatory services for the Fund:

 

·      Maintain a calendar for all SEC, CFTC, NFA and NYSE regulatory matters
in the form of Exhibit B; provided that the Fund and/or the Sponsor
shall notify the Administrator of additional regulatory matters to be added to
such calendar as soon as practicable

 

The Administrator also shall prepare and file the
following regulatory notices/forms/reports:

 

·      With the SEC, Forms 3, 4 and 5 and Schedules 13D and 13G for the
officers and Directors/Trustees of the Sponsor and such other persons as
requested by the Fund

·      With the SEC, Current Reports on Form 8-K as circumstances warrant

·      With the NYSE, such notices/forms as agreed to among the Fund, the
Sponsor and the Administrator

 

14

 

Transfer Agency
Services

 

The Administrator shall perform the following
transfer agency services:

 

I.              Issuance and Redemption of Unit Baskets. It
is agreed and understood that the Fund, and the Administrator on the Fund’s
behalf, shall issue and redeem Share Baskets of the Fund in blocks of                     
Units (“Creation Baskets” and “Redemption Baskets,” respectively) to and from
such persons as are identified by the Fund as “Authorized Purchasers” or “Authorized
Participants.”

 

A.    Pursuant to such purchase orders that the Administrator as the Index
Receipt Agent shall receive from ALPS Distributors, Inc. (“Marketing Agent”)
and pursuant to the procedures set forth in the Authorized Participant
Agreement entered into by the Fund, the Administrator shall transfer
appropriate trade instructions to the Fund’s custodian, Brown Brothers Harriman &
Co. (“Custodian”) and pursuant to such orders register the appropriate number
of book entry only Fund Units in the name of The Depository Trust Company (“DTC”)
or its nominee as a unitholder (each a “Authorized Participant”) of the Fund
and deliver the Basket of Units of the Fund.

 

B.    Pursuant to such redemption orders that Index Receipt Agent shall
receive from the Marketing Agent, pursuant to the procedures set forth in the
Authorized Participant Agreement entered into by the Fund, the Administrator
shall transfer appropriate trade instructions to the Custodian and, pursuant to
such orders, redeem the appropriate number of Fund Units that are delivered to
the designated DTC Participant Account of the Custodian for redemption and
debit such Units from the account of the Authorized Participant on the register
of the Fund.

 

C.    On behalf of the Fund, the Administrator shall issue Fund Units in Creation
Baskets for settlement with purchasers through DTC as the purchaser is
authorized to receive. Beneficial ownership of Fund Units shall be shown on the
records of DTC and DTC Participants and not on any records maintained by the
Administrator. In issuing Fund Units through DTC to an Authorized Participant,
the Administrator shall be entitled to rely upon the latest Instructions that
are received from the Marketing Agent by the Administrator as Index Receipt
Agent concerning the issuance and delivery of such Units for settlement.

 

D.    The Administrator shall not issue on behalf of the Fund any Fund Units
where it has received an Instruction from the Fund or the Marketing Agent or
written notification from any federal or state authority that the sale of the
Fund Units has been suspended or discontinued, and the Administrator shall be
entitled to rely upon such Instructions or written notification.

 

E.     Upon the issuance of Fund Units as provided herein, the Administrator
shall not be responsible for the payment of any original issue or other taxes,
if any, required to be paid by the Fund or the Marketing Agent in connection
with such issuance.

 

F.     Fund Units may be redeemed in accordance with the procedures set forth
in the relevant Authorized Participant Agreement and the Administrator shall
duly process all redemption requests.

 

G.    The Administrator will act only upon Instruction from the Fund
and/or the Sponsor in addressing any failure in the delivery of cash,
treasuries and/or Units in connection with the issuance and redemption of Fund
Units.

 

15

 

II.            Recordkeeping.

 

A.    The Administrator shall record the issuance of Fund Creation Baskets
and maintain, pursuant to Rule 17Ad-14(e) under the Securities Exchange
Act of 1934, as amended, a record of the total number of Fund Creation Baskets
that are authorized, issued and outstanding based upon data provided to the
Administrator by the Fund or the Sponsor. The Administrator shall also provide
the Fund on a regular basis with the total number of Fund Units authorized,
issued and outstanding; provided however that the Administrator shall not be
responsible for monitoring the issuance of such Units or compliance with any
laws relating to the validity of the issuance or the legality of the sale of
such Units.

 

 

AIRSHARESTM EU CARBON ALLOWANCES FUND

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date: April 8, 2008

  

 

XSHARES ADVISORS LLC

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date: April 8, 2008

  

 

16

 

APPENDIX B
TO THE

ADMINISTRATIVE AGENCY AGREEMENT

 

List of Authorized Persons

 

 

AIRSHARESTM EU CARBON ALLOWANCES FUND

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date: April 8, 2008

  

 

XSHARES ADVISORS LLC

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date: April 8, 2008

  

 

17

 

APPENDIX C TO THE

 

ADMINISTRATIVE AGENCY AGREEMENT

 

AUTHORIZED
SOURCES

 

Each
of the Fund and the Sponsor hereby acknowledges that the Administrator is
authorized to use the following authorized sources for financial reporting,
pricing (including corporate actions, dividends and rights offerings), and
foreign exchange quotations, to assist it in fulfilling its obligations under
the aforementioned Agreement.

 

BLOOMBERG

BEAR
STERNS PRICING DIRECT INC

MARKIT

EXTEL (LONDON)

FUTURES
COMMISSION MERCHANTS

FUND
MANAGERS

INTERACTIVE
DATA CORPORATION

BROKERS

REUTERS

SUBCUSTODIAN
BANKS

TELEKURS

VALORINFORM (GENEVA)

REPUTABLE
FINANCIAL PUBLICATIONS

STOCK
EXCHANGES

FINANCIAL
INFORMATION INC. CARD

JJ
KENNY

FRI
CORPORATION

FIMAT
USA, LLC

EXECUTING
BROKERS

 

 

AIRSHARESTM EU CARBON ALLOWANCES FUND

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date: April 8, 2008

  

 

XSHARES ADVISORS LLC

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date: April 8, 2008

  

 

18

 

APPENDIX D
TO THE

 

ADMINISTRATIVE AGENCY AGREEMENT

 

FEE SCHEDULE

 

I.              Custody Fees:

 

	
  Annual US Asset Charge:

  	
   

  	
   

  	
   

  
	
  First $1 billion

  	
  1.00 basis points

  	
   

  
	
  Over $1billion

  	
  0.65 basis points

  	
   

  
	
   

  	
   

  	
   

  
	
  Non-US Asset Custody Charge(1):

  	
  3.00 basis points

  	
   

  
	
   

  	
   

  	
   

  
	
  US Transaction Charge(2):

  	
  $7.00

  	
   

  

 

(2)  Includes: DTC, Fed, wires, book transfers,
repos, commercial paper, maturity collections, paydowns and cancels &
corrects

 

	
  Non-US
  Transaction Charge(1):

  	
  $

  	
  25.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Non-automated
  Instruction Charge:

  	
  $

  	
  15.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Derivative
  Transactions (swaps)

  	
  $

  	
  50

  	
   

  
	
  Derivative
  Transactions (forwards, options, futures)

  	
  $

  	
  10

  	
   

  

 

(1)  Based on EAFE
markets. All other markets are subject to negotiation prior to investment.

 

BBH custody fee schedule is based on the assumption
that futures collateral cash balances will be invested in BBH offshore
overnight cash sweep program.

 

II.            Fund Accounting Fees:

 

	
  Annual Asset Charge:

  	
   

  	
   

  	
   

  
	
  First $1 billion

  	
  3.00 basis points

  	
   

  
	
  Over $1 billion

  	
  2.50 basis points

  	
   

  

 

 

III.           Fund Administration(3) Fees:

 

	
  Annual Asset Charge:

  	
   

  	
   

  	
   

  
	
  First $1 billion

  	
  4.00 basis points

  	
   

  
	
  Over $1 billion

  	
  3.00 basis points

  	
   

  

 

(3) Includes: 
Assistant Treasurer, Financial Reporting, Corporate Secretary and Legal
Support

 

IV.           Authorized Participant Level
Transfer Agency:

	
   

  	
   

  	
   

  	
   

  
	
  Annual Charge:

  	
  $ 20,000.00 per fund

  	
   

  
	
  Transaction Charge:

  	
  $ 7.00

  	
   

  

 

19

 

V.            Securities Lending:

 

The XShares Advisors ETFs would retain 70% of the gross revenue from
the program. BBH would also waive all market transaction charges associated
with loan placements, recalls and collateral movements.

 

VI.           Out of Pocket Expenses:

 

Out-of-pocket expenses including but not limited to
locally mandated charges, subcustodian communications expenses, telex, audit
reporting, legal, telephone, postage including overnight and other courier
services, duplication, forms and supplies would be additional. Direct expenses
including but not limited to stamp duties, foreign investor registration,
commissions, dividend and income collection charges, proxy charges, taxes,
certificate fees, special handling, transfer, withdrawal, Euroclear deposit and
withdrawal charges, NSCC charges, holdings charges and registration fees,
market quotation costs, index licensing fees, state registration costs, travel
and lodging costs related to Board meetings, charges for Edgarizing documents,
and record retention retrieval and destruction costs would be additional. Customized
computer programming would be additional.

 

VII.         Annual Account Minimum:

 

	
  Custody, Fund Accounting
  and Fund Administration

  	
  $

  	
  175,000

  	
   

  

 

BBH will waive the above stated minimum for the
first six months after product launch.

 

 

BROWN
BROTHERS HARRIMAN & CO.

 

 

	
  By:

  	
  /s/ Timothy J. Connelly

  	
   

  
	
   

  	
  Name: Timothy J. Connelly

  
	
   

  	
  Title: Partner

  
	
   

  	
  Date: April 8, 2008

  

 

XSHARES ADVISORS LLC

 

 

	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
  Name: Anthony Dudzinski

  
	
   

  	
  Title: CEO

  
	
   

  	
  Date: April 8, 2008

  

 

20

 

 

APPENDIX E

 

BBH Pricing
Policies

Futures,
Forwards, Swaps, Options and Treasuries

 

The pricing policies stated below are used for all
BBH clients, including Mutual Fund Registered Investment Companies. These
policies have been audited by numerous accounting firms during annual fund
audits.

 

Futures

 

Futures traded on exchanges are valued using the closing
settlement prices quoted on the relevant exchange and obtained from pricing
sources, typically Bloomberg or Reuters.

 

Forward Currency Contracts

 

BBH obtains the WM Reuters London Close closing spot
rates and the WM Reuters London Close forward point rates on a daily basis. The
currency forward contract pricing model derives the differential in point rates
to the expiration date of the forward and calculates its present value. The
forward is valued at the net of the present value and the spot rate.

 

Swaps

 

Swaps and other similar derivative or contractual
type instruments are valued at a price provided by a single broker or dealer,
typically the counterparty. If no such price is available, the contract is
valued at a price at which the counterparty to such contract would repurchase
the instrument or terminate the contract.

 

Options

 

Option
contracts on securities, currencies, indices, futures contracts, commodities
and other instruments shall be valued at the last sale price on the exchange or
market that is the Primary Market. If a contract did not trade on the Primary
Market, it shall be valued at the last sale price on another exchange or market
where it did trade. If there is no such sale price, the value shall be the most
recent bid quotation.

 

Sale
prices and bid quotations indicated above shall be supplied by a Pricing
Service (Reuters, Bloomberg, IDC, etc.). If a Pricing Service is not able to
provide such sale prices or bid quotations, the value shall be determined by
taking the mean between the bid and the asked quotations provided by a single
broker or dealer, unless the broker or dealer can only provide a bid quotation,
in which case the value shall be such bid quotation.

 

Except
as provided below, OTC currency options are valued by uploading the applicable
implied volatility rates from Reuters or Bloomberg. Other inputs are either
uploaded (interest rates, spots) or are specified when the ticker symbols are
set up (expiration date, strike). OTC currency options are then priced by using
the Garman-Kohlhagen modified Black-Scholes formula, which adjusts for a
constant yield versus a fixed dividend.

 

Except
as provided below, OTC equity/index options are priced according to the
contract specifications (days to expiration, current spot index level, interest
rates, dividends, strike price) using the Black-Scholes pricing model, modified
for dividends. The volatility input assumption is interpolated from the
previous day’s price.

 

21

 

US Treasuries

BBH
uses an evaluated bid supplied by IDC for treasury prices.

 

 

BROWN
BROTHERS HARIMAN & CO.

 

50 MILK STREET, BOSTON, MA
02109-3661

www.bbh.com TEL. 617.742.1818

 

22Exhibit 10.2

 

CUSTODIAN AGREEMENT

 

THIS AGREEMENT, dated as of April 8,
2008, between AIRSHARESTM EU CARBON ALLOWANCES FUND,
a commodity pool formed as a Delaware statutory trust with a principal office
at 420 Lexington Avenue, New York, New York 10170 (the Company),
and BROWN BROTHERS HARRIMAN & CO.,
a limited partnership formed under the laws of the State of New York (BBH&Co. or  the Custodian),

 

W I T N E S S E T H:

 

WHEREAS, the Company wishes to employ BBH&Co. to act as
global custodian for the Company and to provide related services, all as
provided herein, and BBH&Co. is willing to accept such employment, subject
to the terms and conditions herein set forth;

 

NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained, the Company and BBH&Co. hereby
agree, as follows:

 

1.                                       Appointment
of Custodian.  The Company hereby
appoints BBH&Co. as the Company’s global custodian, and  BBH&Co. hereby accepts such
appointment.  All investments of the
Company delivered to the Custodian or its agents or Subcustodians (hereinafter
collectively referred to as Investments)
shall be dealt with as provided in this Agreement.   The duties of the Custodian with respect to
such Investments shall be only as set forth expressly in this Agreement which duties
are generally comprised of safekeeping and various administrative duties that
will be performed in accordance with Instructions and as reasonably required to
effect Instructions.

 

2.                                       Representations,
Warranties and Covenants of the Company. 
The Company hereby represents, warrants and covenants
each of the following:

 

2.1  This Agreement has been, and at the time of
delivery of each Instruction such Instruction will have been, duly authorized,
executed and delivered by the Company. 
This Agreement does not violate any Applicable Law or conflict with or
constitute a default under the Company’s prospectus, articles of organization
or other constitutive document, agreement, judgment, order or decree to which
the Company is a party or by which it or its Investments is bound.

 

1

 

2.2  By providing an Instruction
with respect to the first acquisition of an Investment in a jurisdiction other
than the United States of America, the Company shall be deemed to have
confirmed to the Custodian that the Company has (a) assessed all material
Country or Sovereign Risks and accepted responsibility for their occurrence, (b) made
all determinations required to be made by the Company under Applicable Law, and
(c) appropriately and adequately disclosed to its shareholders, other
investors and all persons who have rights in or to such Investments, all
material investment risks, including those relating to the custody and
settlement infrastructure or the servicing of securities in such jurisdiction.

 

2.4  The Company shall safeguard
and shall solely be responsible for the safekeeping of any testkeys,
identification codes, passwords, other security devices or statements of
account with which the Custodian provides it. 
If the Company uses any on-line or similar communications service made
available by the Custodian, the Company shall be solely responsible for
ensuring the security of its access to the service and for the use of the
service, and shall only attempt to access the service and the Custodian’s
computer systems as directed by the Custodian. 
If the Custodian provides any computer software to the Company relating
to the services described in this Agreement, the Company will only use the
software for the purposes for which the Custodian provided the software to the
Company, and will abide by the license agreement accompanying the software and
any other security policies which the Custodian provides to the Company.

 

2.5  Notwithstanding anything in
this Agreement to contrary effect, the Company specifically represents and
warrants to the Custodian that it shall at all times be principally liable for
the repayment of any Advance made by the Custodian under this Agreement.

 

3.                                       Representation
and Warranty of BBH&Co. 
BBH&Co. hereby represents and warrants and covenants the following:

 

3.1  It has obtained all required governmental and
regulatory licenses and/or such other authorisations as may be necessary to
perform its obligations and carry out the transactions contemplated under this
Agreement; and

 

3.2  This Agreement has been duly
authorized, executed and delivered by BBH&Co. and does not and will not
violate any Applicable Law or conflict with or constitute a default under
BBH&Co.’s limited partnership agreement or any agreement, instrument,
judgment, order or decree to which BBH&Co. is a party or by which it is
bound.

 

2

 

4.                                       Instructions.  Unless otherwise explicitly indicated herein,
the Custodian shall perform its duties pursuant to Instructions.  As used herein, the term Instruction
shall mean a directive initiated by the Company, acting directly or through its
directors, officers or other Authorized Persons, which directive shall conform
to the requirements of this Section 4.

 

4.1  Authorized
Persons.  For purposes
hereof, an Authorized Person shall be a
person or entity authorized to give Instructions for or on behalf of the
Company by written notice to the Custodian or otherwise in accordance with
procedures delivered to and acknowledged by the Custodian.  The Custodian may treat any Authorized Person
as having full authority of the Company to issue Instructions hereunder unless
the notice of authorization contains explicit limitations as to said
authority.   The Custodian shall be
entitled to rely upon the authority of Authorized Persons until it receives
appropriate written notice from the Company to the contrary.

 

4.2  Form of
Instruction.  Each
Instruction shall be transmitted by such secured or authenticated electro-mechanical
means as the Custodian shall make available to the Company from time to time
unless the Company shall elect to transmit such Instruction in accordance with
Subsections 4.2.1 through 4.2.3 of this Section.

 

4.2.1  Company
Designated Secured-Transmission Method.  Instructions may be transmitted through a
secured or tested electro-mechanical means identified by the Company or by an
Authorized Person entitled to give Instruction and acknowledged and accepted by
the Custodian, it being understood that such acknowledgment shall authorize the
Custodian to accept such means of delivery but shall not represent a judgment
by the Custodian as to the reasonableness or security of the means utilized by
the Authorized Person..

 

4.2.2  Written
Instructions.  Instructions
may be transmitted in a writing that bears the manual signature of Authorized
Persons.

 

4.2.3  Other
Forms of Instruction. 
Instructions may also be transmitted by other means determined by the
Company or Authorized Persons and acknowledged and accepted by the Custodian
(including Instructions given orally or by SWIFT, telex or telefax (whether
tested or untested).

 

When an Instruction is
given by means established under Subsections 4.2.1 through 4.2.3, it shall be
the responsibility of the Custodian to use reasonable care to adhere to any
security or other procedures established in writing between the Custodian and
the Authorized Person with respect to such means of Instruction, but the
Authorized Person shall be solely responsible for determining that the
particular means chosen is reasonable under the circumstances.  Oral Instructions shall be binding upon the
Custodian upon receipt of such instructions by the

 

3

 

Custodian.  With respect to telefax instructions, the
parties agree and acknowledge that receipt of legible instructions cannot be
assured, that the Custodian cannot verify that authorized signatures on telefax
instructions are original or properly affixed, and that the Custodian shall not
be liable for losses or expenses incurred through actions taken in reasonable
reliance on inaccurately stated, illegible or unauthorized telefax
instructions.  The provisions of Section 4A
of the Uniform Commercial Code shall apply to funds transfers performed in
accordance with Instructions.  The Funds Transfer Services Schedule and the
Electronic and Online Services Schedule to this Agreement shall each comprise a
designation of a means of delivering Instructions for purposes of this Section 4.2.

 

4.3  Completeness and Contents
of Instructions.  The
Authorized Person shall be responsible for assuring the adequacy and accuracy
of Instructions.  Particularly, upon any
acquisition or disposition or other dealing in Investments and upon any
delivery and transfer of any Investment or moneys, the person initiating the
Instruction shall give the Custodian an Instruction with appropriate detail,
including, without limitation:

 

4.3.1  The transaction date and the
date and location of settlement;

 

4.3.2  The specification of the
type of transaction;

 

4.3.3  A description of the Investments or moneys in
question, including, as appropriate, quantity, price per unit, amount of money
to be received or delivered and currency information.  Where an Instruction is communicated by
electronic means, or otherwise where an Instruction contains an identifying
number such as a CUSIP, SEDOL or ISIN number, the Custodian shall rely on such
number as controlling notwithstanding any inconsistency contained in such
Instruction, particularly with respect to Investment description; and

 

4.3.4  The name of the broker or
similar entity concerned with execution of the transaction.

 

If the Custodian
determines that an Instruction is either unclear or incomplete, the Custodian
shall give prompt notice of such determination to the Company, and the Company
shall thereupon amend or otherwise reform the Instruction.  In such event, the Custodian shall have no
obligation to take any action in response to the Instruction initially
delivered until the redelivery of an amended or reformed Instruction.

 

4.4  Timeliness of Instructions.  In giving an Instruction, the Company shall
take into consideration delays which may occur due to the involvement of a
Subcustodian or agent, differences in time zones, and other factors particular
to a given market, exchange or issuer. 
When the Customer and the Custodian have established specific

 

4

 

timing requirements or deadlines with respect to particular classes of
Instruction, or when an Instruction is received by the Custodian at such a time
that it could not reasonably be expected to have acted on such instruction due
to time zone differences or other factors beyond its reasonable control, the
execution of any Instruction received by the Custodian after such deadline or
at such time (including any modification or revocation of a previous
Instruction) shall be at the risk of the Company.

 

5.                                       Safekeeping
of Company Assets.  The Custodian shall
hold Investments delivered to it or Subcustodians for the Company in accordance
with the provisions of this Section.  
The Custodian shall not be responsible for (a) the safekeeping of
Investments not delivered or that are not caused to be issued to it or its
Subcustodians, or, (b) pre-existing faults or defects in Investments that
are delivered to the Custodian or its Subcustodians.  The Custodian is hereby authorized to hold
with itself or a Subcustodian, and to record in one or more accounts, all
Investments delivered to and accepted by the Custodian, any Subcustodian or
their respective agents pursuant to an Instruction or in consequence of any
corporate action or income event.  The
Custodian shall hold Investments for the account of the Company and shall
segregate Investments from assets belonging to the Custodian and shall cause
its Subcustodians to segregate Investments from assets belonging to the
Subcustodian in an account held for the Company or in an account maintained by
the Subcustodian generally for non-proprietary assets of the Custodian.

 

5.1 Use of Securities Depositories.  The Custodian may deposit and maintain
Investments in any Securities Depository agreed upon with the Customer in
advance in writing, either directly or through one or more Subcustodians
appointed by the Custodian.  Investments
held in a Securities Depository shall be held (a) subject to the
agreement, rules, statement of terms and conditions or other document or
conditions effective between the Securities Depository and the Custodian or the
Subcustodian, as the case may be, and (b) in an account for the Company or
in bulk segregation in an account maintained for the non-proprietary assets of
the entity holding such Investments in the Depository.  If market practice or the rules and
regulations of the Securities Depository prevent the Custodian, the
Subcustodian or (any agent of either) from holding its client assets in such a
separate account, the Custodian, the Subcustodian or other agent shall as
appropriate segregate such Investments for the benefit of the Company or for
the benefit of clients of the Custodian generally on its own books.

 

5.2  Certificated
Assets.  Investments which
are certificated may be held in registered or bearer form: (a) in the
Custodian’s vault; (b) in the vault of a Subcustodian or agent of the
Custodian or a Subcustodian; or (c) in an account maintained by the
Custodian, Subcustodian or agent at a Securities Depository, all in accordance
with customary market

 

5

 

practice in the jurisdiction in which any Investments are held.

 

5.3  Registered
Assets.  Investments which
are registered may be registered in the name of the Custodian, a Subcustodian,
or in the name of the Company or a nominee for any of the foregoing, and may be
held in any manner set forth in Section 5.2 above with or without any
identification of fiduciary capacity in such registration.

 

5.4  Book
Entry Assets.  Investments
which are represented by book-entry may be so held in an account maintained by
the Book-entry Agent on behalf of the Custodian, a Subcustodian, an Agent of
the Custodian, or a Securities Depository.

 

5.5  Replacement
of Lost Investments.  In
the event of a loss of Investments for which loss the Custodian is responsible
under the terms of this Agreement,  the
Custodian shall replace such Investment, or in the event that such replacement
cannot be effected, the Custodian shall pay to the Company the fair market
value of such Investment based on the last available price as of the close of
business in the relevant market on the date of such loss, or, such other lesser
amount as shall be agreed by the parties.

 

6.  Administrative
Duties of the Custodian. 
The Custodian shall perform the following administrative duties with
respect to Investments of the Company.

 

6.1  Purchase
of Investments.  Pursuant
to Instruction, Investments purchased for the account of the Company shall be
paid for (a) against delivery thereof to the Custodian or a Subcustodian,
as the case may be, either directly or through a Clearing Corporation or a
Securities Depository (in accordance with the rules of such Securities
Depository or such Clearing Corporation), or (b) otherwise in accordance
with an Instruction, Applicable Law, generally accepted trade practices, or the
terms of the instrument representing such Investment.

 

6.2  Sale
of Investments.  Pursuant
to Instruction, Investments sold for the account of the Company shall be
delivered (a) against payment therefor in cash, by check or by bank wire
transfer, (b) by credit to the account of the Custodian or the applicable
Subcustodian, as the case may be, with a Clearing Corporation or a Securities
Depository (in accordance with the rules of such Securities Depository or
such Clearing Corporation), or (c) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or the terms
of the instrument representing such 
Investment.

 

6.3  Delivery
and Receipt in Connection with Borrowings of the Company or other Collateral
and Margin Requirements. 
Pursuant to Instruction, the Custodian may deliver or receive
Investments or cash of the Company in connection with borrowings or loans by
the Company and other collateral and margin requirements.

 

6

 

6.4 
Futures and Options. 
If, pursuant to an Instruction, the Custodian shall become a party to an
agreement with the Company and a futures commission merchant regarding margin (Tri-Party Agreement), the Custodian shall (a) receive
and retain, to the extent the same are provided to the Custodian, confirmations
or other documents evidencing the purchase or sale by the Company of
exchange-traded futures contracts and commodity options, (b) when required
by such Tri-Party Agreement, deposit and maintain in an account opened pursuant
to such Agreement (Margin Account),
segregated either physically or by book-entry in a Securities Depository for
the benefit of any futures commission merchant, such Investments as the Company
shall have designated as initial, maintenance or variation “margin” deposits or
other collateral intended to secure the Company’s performance of its
obligations under the terms of any exchange-traded futures contracts and
commodity options; and (c) thereafter pay, release or transfer Investments
into or out of the margin account in accordance with the provisions of  such Agreement. Alternatively, the Custodian
may deliver Investments, in accordance with an Instruction, to a futures
commission merchant for purposes of margin requirements.  The Custodian shall in no event be
responsible for the acts and omissions of any futures commission merchant to
whom Investments are delivered pursuant to this Section; for the sufficiency of
Investments held in any Margin Account; or, for the performance of any terms of
any exchange-traded futures contracts and commodity options.

 

6.5  Contractual Obligations and Similar Investments.  From time to time, the
Company’s assets may include Investments that are not ownership interests as
may be represented by certificate (whether registered or bearer), by entry in a
Securities Depository or by Book-entry Agent, registrar or similar agent for
recording ownership interests in the relevant Investment.  If the Company shall at any time acquire such
Investments, including without limitation deposit obligations, loan
participations, repurchase agreements and derivative arrangements, the
Custodian shall (a) receive and retain, to the extent the same are
provided to the Custodian, confirmations or other documents evidencing the
arrangement; and (b) perform on the Company’s account in accordance with
the terms of the applicable arrangement, but only to the extent directed to do
so by Instruction.   The Custodian shall
have no responsibility for agreements running to the Company as to which it is
not a party other than to retain, to the extent the same are provided to the
Custodian, documents or copies of documents evidencing the arrangement and, in
accordance with Instruction, to include such arrangements in reports made to
the Company.

 

6.6  Exchange
of Securities.  Unless
otherwise directed by Instruction, the Custodian shall:  (a) exchange securities held for the
account of the Company for other securities in connection with any
reorganization, recapitalization, conversion, stock split, change of par value
of shares or similar event, and (b) deposit any such securities in
accordance with the terms of any reorganization or protective plan.

 

7

 

6.7  Surrender
of Securities.  Unless
otherwise directed by Instruction, the Custodian may surrender securities: (a) in
temporary form for definitive securities; (b) for transfer into the name
of an entity allowable under Section 5.3; and (c) for a different
number of certificates or instruments representing the same number of shares or
the same principal amount of indebtedness.

 

6.8  Rights,
Warrants, Etc.  Pursuant
to Instruction, the Custodian shall (a) deliver warrants, puts, calls,
rights or similar securities to the issuer or trustee thereof, or to any agent
of such issuer or trustee, for purposes of exercising such rights or selling
such securities, and (b) deliver securities in response to any tender
offer.

 

6.9  Mandatory
Corporate Actions.  Unless
otherwise directed by Instruction, the Custodian shall: (a) comply with
the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions
or similar rights of securities ownership affecting securities held on the
Company’s account and promptly notify the Company of such action, and (b) collect
all stock dividends, rights and other items of like nature with respect to such
securities.

 

6.10  Income
Collection.  Unless
otherwise directed by Instruction, the Custodian shall collect any amount due
and payable to the Company with respect to Investments and promptly credit the
amount collected to a Principal or Agency Account; provided, however, that the
Custodian shall not be responsible for: (a) the collection of amounts due
and payable with respect to Investments that are in default, or (b) the
collection of cash or share entitlements with respect to Investments that are
not registered in the name of the Custodian or its Subcustodians.  The Custodian is hereby authorized to endorse
and deliver any instrument required to be so endorsed and delivered to effect
collection of any amount due and payable to the Company with respect to
Investments.

 

6.11  Corporate
Action Information.  In
fulfilling the duties set forth in Sections 6.6 through 6.10 above, the
Custodian shall provide to the Company such material information pertaining to
a corporate action which the Custodian actually receives; provided that the
Custodian shall not be responsible for the completeness or accuracy of such
information. Information relative to any pending corporate action made available
to the Company via any of the services described in the Electronic and Online
Services Schedule shall constitute the delivery of such information by the
Custodian hereunder.  Any advance credit
of cash or shares expected to be received as a result of any corporate action
shall be subject to actual collection and may, when the Custodian deems
collection unlikely, be reversed by the Custodian.

 

6.12  Proxy
Materials.  The Custodian
shall deliver, or cause to be delivered, to the Company, proxy forms, notices
of meeting, and any other notices or announcements materially affecting or
relating to Investments received by the Custodian.  Information relative to any pending corporate
action made available to the Company via any of the

 

8

 

services described in the Electronic and Online Services Schedule shall
constitute the delivery of such information by the Custodian hereunder.

 

6.13  Ownership Certificates and
Disclosure of the Company’s Interest.  The Custodian is hereby authorized to execute
on behalf of the Company ownership certificates, affidavits or other disclosure
required under Applicable Law or established market practice in connection with
the receipt of income, capital gains or other payments by the Company with
respect to Investments, or in connection with the sale, purchase or ownership
of Investments.

 

With respect to
securities issued in the United States of America, the Custodian [   ] may          [  
] may not release the identity of the Company to an issuer which
requests such information pursuant to the Shareholder Communications Act of
1985 for the specific purpose of direct communications between such issuer and
the Company.  IF NO BOX IS CHECKED, THE CUSTODIAN
SHALL RELEASE SUCH INFORMATION UNTIL IT RECEIVES CONTRARY INSTRUCTIONS
FROM THE COMPANY.  With respect to
securities issued outside of the United States of America, information shall be
released in accordance with law or custom of the particular country in which
such security is located.

 

6.14  Taxes.  The Custodian shall, where applicable and to
the extent practicable, assist the Company in the reclamation of taxes withheld
on dividends and interest payments received by the Company.  In the performance of its duties with respect
to tax withholding and reclamation, the Custodian shall be entitled to
reasonably rely on the advice of counsel and upon information and advice
regarding the Company’s tax status that is received from or on behalf of the
Company without duty of separate inquiry.

 

6.15  Other
Dealings.  The Custodian
shall otherwise act as directed by Instruction, including without limitation
effecting the free payments of moneys or the free delivery of securities,
provided that such Instruction shall indicate the purpose of such payment or
delivery and that the Custodian shall record the party to whom the payment or
delivery is made.

 

6.16  Nondiscretionary
Details and Minor Expenses.  The Custodian shall attend to all
nondiscretionary details in connection with the sale or purchase or other
administration of Investments, except as otherwise directed by an Instruction,
and may make payments to itself or others for minor expenses of administering
Investments under this Agreement, 
provided that the Company shall have the right to request an accounting
with respect to such expenses.

 

6.17  Use of Agents.  The Custodian may at any time
in its discretion use reasonable care to appoint (and may at any time remove)
agents (other than Subcustodians) to carry out some or all of the administrative
provisions of this Agreement (Agents),
provided, however, that the appointment of an agent shall not relieve the
Custodian of any of its obligations under this Agreement.

 

9

 

7.                                       Cash
Accounts, Deposits and Money Movements.  Subject to the
terms and conditions set forth in this Section 7, the Company hereby
authorizes the Custodian to open and maintain, with itself or with
Subcustodians, cash accounts in United States Dollars, in such other currencies
as are the currencies of the countries in which the Company maintains
Investments or in such other currencies as the Company shall from time to time
request by Instruction.  Notwithstanding
anything in this Agreement to contrary effect, the Company shall be liable as
principal for any overdrafts resulting from its Instruction occurring in any
cash accounts.

 

7.1  Types
of Cash Accounts.  Cash
accounts opened on the books of the Custodian (Principal
Accounts) shall be opened in the name of the Company.  Such accounts collectively shall be a deposit
obligation of the Custodian and shall be subject to the terms of this Section 7
and the general liability provisions contained in Section 9.  Cash accounts opened on the books of a
Subcustodian may be opened in the name of the Company or the Custodian or in
the name of the Custodian for its customers generally (Agency
Accounts). Such deposits shall be obligations of the Subcustodian
and shall be treated as an Investment of the Company.  Accordingly, the Custodian shall be
responsible for exercising reasonable care in the administration of such
accounts but shall not be liable for their repayment in the event such
Subcustodian, by reason of its bankruptcy or insolvency fails to make
repayment.

 

7.1.1                                                Administrative Accounts. 
In connection with the services provided hereunder, the
Custodian is hereby directed to open cash accounts on its books and records
from time to time for the purposes of receiving subscriptions and/or processing
redemptions on behalf of the Company, and/or for the purposes of  aggregating, netting and/or clearing
transactions (including, without limitation foreign exchange, repurchase
agreements, capital stock activity, expense payment) or other administrative purposes
(each an “Account”).  Each such Account
shall be subject to the terms and conditions of this Agreement and the Company
shall be liable for the satisfaction of its own obligations in connection with
each Account.

 

7.2  Payments
and Credits with Respect to the Cash Accounts.  The Custodian shall make payments from or
deposits to any of the cash accounts in the course of carrying out its
administrative duties, including but not limited to income collection with
respect to Investments, and otherwise in accordance with Instructions.  The Custodian and its Subcustodians shall be
required to credit amounts to the cash accounts only when moneys are actually
received in cleared funds in accordance with generally accepted banking
practice in the country and currency of deposit.  Any credit made to any Principal or Agency
Account before actual receipt of cleared funds shall be provisional and may be
reversed by the Custodian in the event such payment is not actually
collected.  Unless otherwise specifically
agreed in writing by the Custodian or any Subcustodian, all deposits shall be
payable only at the branch of the Custodian or Subcustodian where the deposit
is made or carried.

 

10

 

7.3  Currency and Related
Risks.  The Company bears
risks of holding or transacting in any currency, including any mark to market
exposure associated with a foreign exchange transaction undertaken with the
Custodian.   The Custodian shall not be
liable for any loss or damage arising from the applicability of any law or
regulation now or hereafter in effect, or from the occurrence of any event,
which may delay or affect the transferability, convertibility or availability
of any currency in the country (a) in which such Principal or Agency
Accounts are maintained or (b) in which such currency is issued, and in no
event shall the Custodian be obligated to make payment of a deposit denominated
in a currency during the period during which its transferability,
convertibility or availability has been affected by any such law, regulation or
event.  Without limiting the generality
of the foregoing, neither the Custodian nor any Subcustodian shall be required
to repay any deposit made at a foreign branch of either the Custodian or
Subcustodian if such branch cannot repay the deposit due to a cause for which
the Custodian would not be responsible in accordance with the terms of Section 9
of this Agreement unless the Custodian or such Subcustodian expressly agrees in
writing to repay the deposit under such circumstances.  All currency transactions in any account
opened pursuant to this Agreement are subject to exchange control regulations
of the United States and of the country where such currency is the lawful
currency or where the account is maintained. Any taxes, costs, charges or fees imposed
on the convertibility of a currency held by the Company shall be for the
account of the Company.

 

7.4 
Foreign Exchange Transactions.  The Custodian shall, subject to the terms of
this Section, settle foreign exchange transactions (including contracts,
futures, options and options on futures) on behalf and for the account of the
Company with such currency brokers or banking institutions, including
Subcustodians, as the Company may direct pursuant to Instructions.  The Custodian may act as principal in any
foreign exchange transaction with the Company in accordance with Section 7.4.2
of this Agreement.  The obligations of
the Custodian in respect of all foreign exchange transactions (whether or not
the Custodian shall act as principal in such transaction) shall be contingent
on the free, unencumbered transferability of the currency transacted on the
actual settlement date of the transaction.

 

7.4.1  Third
Party Foreign Exchange Transactions.  The Custodian shall process foreign exchange
transactions (including without limitation contracts, futures, options, and
options on futures), where any third party acts as principal counterparty to
the Company on the same basis it performs duties as agent for the Company with
respect to any other of the Company’s Investments.  Accordingly, the Custodian shall only be
responsible for delivering or receiving currency on behalf of the Company in
respect of such contracts pursuant to Instructions.  The Custodian shall not be responsible for
the failure of any counterparty (including any Subcustodian) in such agency
transaction to perform its obligations thereunder.  The Custodian (a) shall

 

11

 

transmit cash and Instructions to and from the currency broker or banking
institution with which a foreign exchange contract or option has been executed
pursuant hereto, (b) may make free outgoing payments of cash in the form
of Dollars or foreign currency without receiving confirmation of a foreign
exchange contract or option or confirmation that the countervalue currency
completing the foreign exchange contract has been delivered or received or that
the option has been delivered or received, (c) may, in connection
with cash payments made to third party currency broker/dealers for settlement
of the Company’s foreign exchange spot or forward transactions, foreign
exchange swap transactions and similar foreign exchange transactions, process
settlements using the facilities of CLS Bank according to CLS Bank’s standard
terms, and (d) shall hold all confirmations, certificates and other
documents and agreements received by the Custodian and evidencing or relating
to such foreign exchange transactions in safekeeping.  The Company accepts full responsibility for
its use of third-party foreign exchange dealers and for execution of said
foreign exchange contracts and options and understands that the Company shall
be responsible for any and all costs and interest charges which may be incurred
by the Company or the Custodian as a result of the failure or delay of third
parties to deliver foreign exchange.

 

7.4.2  Foreign
Exchange with the Custodian as Principal.  The Custodian as principal may undertake
foreign exchange transactions with the Company as the Custodian and the Company
may agree from time to time.  In this
event, the foreign exchange transaction will be performed in accordance with
the particular agreement of the parties, or in the event a principal foreign
exchange transaction is initiated by Instruction in the absence of specific
agreement, the transaction will be performed in accordance with the usual
commercial terms of the Custodian.  In
the event that the Company defaults on the settlement of any such foreign
exchange transaction with the Custodian, the Company shall be liable for contracted
currency of the transaction together with any mark to market exposure
associated with the replacement purchase of the contracted currency undertaken
with the Custodian.

 

7.5  Delays.  If no event of  Force Majeure shall have occurred and be
continuing and in the event that a delay shall have been caused by the
negligence or willful misconduct of the Custodian in carrying out an
Instruction to credit or transfer cash, the Custodian shall be liable to the
Company:  (a) with respect to
Principal Accounts, for interest to be calculated at the rate customarily paid
on such deposit and currency by the Custodian on overnight deposits at the time
the delay occurs for the period from the day when the transfer should have been
effected until the day it is in fact effected; and, (b) with respect to
Agency Accounts, for interest to be calculated at the rate customarily paid on
such

 

12

 

deposit and currency by the Subcustodian on overnight deposits at the
time the delay occurs for the period from the day when the transfer should have
been effected until the day it is in fact effected. The Custodian shall not be
liable for delays in carrying out such Instructions to transfer cash which are
not due to the Custodian’s own negligence or willful misconduct.

 

7.6 
Advances.  If, for
any reason in connection with this Agreement the Custodian or any Subcustodian
makes an Advance to facilitate settlement or otherwise for the benefit of the
Company (whether or not any Principal or Agency Account shall be overdrawn
either during, or at the end of, any Business Day), the Company hereby does:

 

7.6.1  acknowledge that the Company shall have no
right, title or interest in or to any Investments purchased with such Advance
or proceeds of such Investments, and that any credit to an account of the
Company shall be provisional, until: (a) the debit of the Principal or
Agency Account by the Custodian for an amount equal to Advance Costs; and/or (b) if
such debit produces an overdraft in such account, reimbursement to the
Custodian or  Subcustodian for the amount
of such overdraft;

 

7.6.2  acknowledge that the Custodian has an
automatically perfected statutory security interest in Investments purchased
with any such Advance pursuant to Section 9-206 of the Uniform Commercial
Code as in effect in the State of New York from time to time;

 

7.6.3  in addition, in order to
secure the obligations of the Company to pay or perform any and all obligations
of the Company pursuant to this Agreement, including without limitation to
repay any Advance made pursuant to this Agreement, grant to the Custodian a
security interest in all Investments and proceeds thereof (as defined in the Uniform Commercial Code as currently in
effect in the State of New York); and agree
to take, and agree that the Custodian may take, in respect of the security
interest referenced above, any further actions that the Custodian may
reasonably require.

 

7.7  Custodian’s Rights. 
Neither the Custodian nor any Subcustodian shall be obligated
to make any Advance or to allow an Advance to occur to the Company, and in the
event that the Custodian or any Subcustodian does make or allow an Advance, any
such Advance and any transaction giving rise to such Advance shall be for the
account and risk of the Company and shall not be deemed to be a transaction
undertaken by the Custodian for its own account and risk.  If such Advance shall have been made or
allowed by a Subcustodian or any other person, the Custodian may assign all or
part of its security interest referenced above and any other rights granted to
the Custodian hereunder to such Subcustodian or other person.  If the Company shall fail to repay the
Advance Costs when due, the Custodian or its

 

13

 

assignee, as the case may be, shall be entitled to a
portion of the available cash balance in any Agency or Principal Account equal
to such Advance Costs, and the Company authorizes the Custodian, on behalf of
the Company, to pay an amount equal to such Advance Costs irrevocably to such
Subcustodian or other person, and to dispose of any Investment to the extent
necessary to make such payment.  Any  Investments and funds credited to accounts
subject to this Agreement created pursuant hereto shall be treated as financial
assets credited to securities accounts under Articles 8 and 9 of the Uniform
Commercial Code as in effect in the State of New York from time to time.  Accordingly, the Custodian and any Subcustodian
shall have the rights and benefits of a secured creditor that is a securities
intermediary under such Articles 8 and 9.

 

7.8  Integrated
Account.  For purposes
hereof, deposits maintained in all Principal Accounts (whether or not
denominated in Dollars) shall collectively constitute a single and indivisible
current account with respect to the Company’s obligations to the Custodian, or
its assignee, and balances in such Principal Accounts shall be available for
satisfaction of the Company’s obligations under this Section 7.  The Custodian shall further have a right of
offset against the balances in any Agency Account maintained hereunder to the
extent that the aggregate of all Principal Accounts is overdrawn.

 

8.                                       Subcustodians
and Securities Depositories. 
Subject to the provisions hereinafter set forth in this Section 8,
the Company hereby authorizes the Custodian to utilize Securities Depositories
to act on behalf of the Company and to appoint from time to time and to utilize
Subcustodians. With respect to securities and cash held by a Subcustodian,
either directly or indirectly (including by a Securities Depository or Clearing
Corporation), notwithstanding any provisions of this Agreement to the contrary,
payment for securities purchased and delivery of securities sold may be made
prior to receipt of securities or payment, respectively, and securities or
payment may be received in a form, in accordance with (a) governmental
regulations, (b) rules of Securities Depositories and Clearing
Corporations, (c) generally accepted trade practice in the applicable
local market, (d) the terms and characteristics of the particular
Investment, or (e) the terms of Instructions.

 

8.1  Domestic
Subcustodians and Securities Depositories.  The Custodian may deposit and/or maintain,
either directly or through one or more Agents appointed by the Custodian,
Investments of the Company in any Securities Depository in the United States,
including The Depository Trust Company, provided such Depository meets
applicable requirements of the Federal Reserve Bank or of the Securities and
Exchange Commission. The Custodian may, at any

 

14

 

time, appoint any bank regulated as such in the United States to act on
behalf of the Company as a Subcustodian for purposes of holding Investments of
the Company in the United States.

 

8.2  Foreign
Subcustodians and Securities Depositories.  The Custodian may deposit and/or maintain
non-U.S. Investments of the Company in any non-U.S. Securities Depository.
Additionally, the Custodian may, from time to time, appoint any bank, trust
company or other similar entity that is regulated as such in the country in
which it offers banking, trust or custodial services, to act on behalf of the
Company as a Subcustodian for purposes of holding Investments of the Company
outside the United States.  The Company
acknowledges its approval of any Subcustodian listed on the Custodian’s Global
Custody Network Listing.  The same may be
updated from time to time and the Custodian agrees to provide the updated
listing to the Customer as soon as reasonably practicable.

 

8.3   Responsibility
for Subcustodians.  Except
as provided in the last sentence of this Section 8.3, the Custodian shall
be liable to the Company for any loss or damage to the Company caused by or
resulting from the acts or omissions of any Subcustodian to the extent that
such acts or omissions would be deemed to be negligence, gross negligence or
willful misconduct under the laws of the place where the act or omission
occurred.

 

8.4  New
Countries.  The Company
shall be responsible for informing the Custodian sufficiently in advance of a
proposed investment which is to be held in a country in which no Subcustodian
is authorized to act in order that the Custodian shall, if it deems appropriate
to do so, have sufficient time to establish a subcustodial arrangement in
accordance herewith. In the event the Custodian is unable to establish such
arrangements prior to the time the Investment is to be acquired, the Custodian
is authorized to designate at its discretion a local safekeeping Agent, and the
use of such local safekeeping Agent shall be at the sole risk of the Company,
and accordingly the Custodian shall be responsible to the Company for the
actions of the Agent if and only to the extent the Custodian shall have
recovered from the Agent for any damages caused the Company by the Agent.

 

9.                                       Responsibility
of the Custodian.  In
performing its duties and obligations hereunder, the Custodian shall use
reasonable care under the facts and circumstances prevailing in the market
where performance is effected.  Subject
to the specific provisions of this Section, the Custodian shall be liable for
any damage incurred by the Company in consequence of the Custodian’s
negligence, bad faith or willful misconduct. 
In no event shall the Custodian be liable hereunder for any special,
indirect, punitive or consequential damages arising out of, pursuant to or in
connection with this Agreement even if the Custodian has been advised of the
possibility of such damages. It is agreed that the Custodian shall have no duty
to assess the risks inherent in the Company’s Investments or to provide
investment advice

 

15

 

with respect to such Investments and that the Company as principal shall
bear any risks attendant to particular Investments such as failure of
counterparty or issuer.

 

9.1  Limitations of Performance.  The Custodian shall not be responsible under
this Agreement for any failure to perform its duties, and shall not be liable
hereunder for any loss or damage in association with such failure to perform,
for or in consequence of the following causes:

 

9.1.1  Force
Majeure.  Force Majeure shall mean any circumstance or event which is
beyond the reasonable control of the Custodian, a Subcustodian or any agent of
the Custodian or a Subcustodian and which adversely affects the performance by
the Custodian of its obligations hereunder, by the Subcustodian of its
obligations under its Subcustody Agreement or by any other agent of the Custodian
or the Subcustodian, including any event caused by, arising out of or involving
(a) an act of God, (b) accident, fire, water or wind damage or
explosion, (c) any computer, system or other equipment failure or
malfunction caused by any computer virus or the malfunction or failure of any
communications medium, (d) any interruption of the power supply or other
utility service, (e) any strike or other work stoppage, whether partial or
total, (f) any delay or disruption resulting from or reflecting the occurrence
of any Country or Sovereign Risk, (g) any disruption of, or suspension of
trading in, the securities, commodities or foreign exchange markets, whether or
not resulting from or reflecting the occurrence of any Country or Sovereign
Risk, (h) any encumbrance on the transferability of a currency or a
currency position on the actual settlement date of a foreign exchange
transaction, whether or not resulting from or reflecting the occurrence of any
Country or Sovereign Risk, or (i) any other cause similarly beyond the
reasonable control of the Custodian.

 

9.1.2  Country
Risk.  Country Risk shall mean, with respect to the acquisition,
ownership, settlement or custody of Investments in a jurisdiction, all risks
relating to, or arising in consequence of, systemic and markets factors
affecting the acquisition, payment for or ownership of Investments including (a) the
prevalence of crime and corruption, (b) the inaccuracy or unreliability of
business and financial information, (c) the instability or volatility of
banking and financial systems, or the absence or inadequacy of an
infrastructure to support such systems, (d) custody and settlement
infrastructure of the market in which such Investments are transacted and held,
(e) the acts, omissions and operation of any Securities Depository, (f) the
risk of the bankruptcy or insolvency of banking agents, counterparties to cash
and securities transactions, registrars or transfer agents, and (g) the
existence of market conditions which prevent the orderly execution or settlement
of transactions or which affect the value of assets.

 

16

 

9.1.3  Sovereign
Risk.  Sovereign Risk shall mean, in respect of any jurisdiction,
including the United States of America, where an Investment is acquired or held
hereunder or under a Subcustody Agreement, (a) any act of war, terrorism,
riot, insurrection or civil commotion, (b) the imposition of any
investment, repatriation or exchange control restrictions by any Governmental
Authority, (c) the confiscation, expropriation or nationalization of any
Investment or cash deposit by any Governmental Authority, whether de facto or
de jure, (d) any devaluation or revaluation of the currency, (e) the
imposition of taxes, levies or other charges affecting Investments or cash
deposits, (f) any change in the Applicable Law, or (g) any other
economic or political risk incurred or experienced.

 

9.2.  Limitations on Liability.  The Custodian shall not be liable for any
loss, claim, damage or other liability arising from the following causes:

 

9.2.1  Failure of Third Parties.  The failure of any third party
including:  (a) any issuer of
Investments or Book-entry Agent or other agent of an issuer; (b) any
counterparty with respect to any Investment, including any issuer of
exchange-traded or other futures, option, derivative or commodities contract; (c) failure
of an Investment Adviser or other Agent of the Company; or (d) failure of
other third parties similarly beyond the control or choice of the Custodian.

 

9.2.2 
Information Sources.  The Custodian may rely upon information
received from issuers of Investments or agents of such issuers, information
received from Subcustodians and from other commercially reasonable sources such
as commercial data bases and the like, but shall not be responsible for
specific inaccuracies in such information, provided that the Custodian has
relied upon such information in good faith, or for the failure of any
commercially reasonable information provider.

 

9.2.3 
Reliance on Instruction. 
Action by the Custodian or the Subcustodian in accordance with an
Instruction, provided that the neither the Custodian nor the Subcustodian knew
that such action was contrary to any provision of, the Company’s declaration of
trust, certificate of incorporation, by-laws, or other constitutive document,
Applicable Law, or actions by the trustees, directors or shareholders of the
Company.

 

9.2.4 
Restricted Securities. 
The limitations inherent in the rights, transferability or similar
investment characteristics of a given Investment of the Company.

 

10.                                 Indemnification.  The Company hereby indemnifies the Custodian
and each Subcustodian, and their respective employees, officers and directors,
(hereinafter collectively referred to as Indemnified Persons)
and agrees to hold each

 

17

 

of them harmless from and against all claims and liabilities, including
counsel fees and taxes, incurred or assessed against any of them in connection
with the performance of this Agreement and any Instruction, provided that such
performance by an Indemnified Person would not be deemed to be negligence,
gross negligence or willful misconduct under the laws of the place where the
act or omission occurred.  If any
Indemnified Person under the preceding sentence gives written notice of a claim
to the Custodian, the Custodian shall promptly give written notice to the
Company.  Not more than thirty days
following the date of such notice, unless the Custodian shall be liable under Section 8
hereof in respect of such claim, the Company will pay the amount of such claim
or reimburse the Custodian for any payment made by the Custodian in respect
thereof.

 

11.                                 Reports
and Records.  The Custodian
shall:

 

11.1  create and maintain records
relating to the performance of its obligations under this Agreement;

 

11.2  make available to the
Company, its auditors, agents and employees, upon reasonable request and during
normal business hours of the Custodian, all records created and maintained by
the Custodian pursuant to paragraph 11.1 above, subject, however, to all
reasonable security requirements of the Custodian then applicable to the
records of its custody customers generally; and

 

11.3  make available to the Company
all Electronic Reports; it being understood that the Custodian shall not be
liable hereunder for the inaccuracy or incompleteness thereof or for errors in
any information included therein.

 

11.4  The Company shall examine all records,
however produced or transmitted, promptly upon receipt thereof and notify the
Custodian promptly of any discrepancy or error therein.  Unless the Company delivers written notice of
any such discrepancy or error within a reasonable time after its receipt
thereof, such records shall be deemed to be true and accurate.

 

11.5   The Company acknowledges that the Custodian
obtains information on the value of assets from outside sources which may be
utilized in certain reports made available to the Company. The Custodian deems
such sources to be reliable but the Company acknowledges and agrees that the
Custodian does not verify such information nor make any representations or
warrantees as to its accuracy or completeness and accordingly shall be without
liability in selecting and using such sources and furnishing such information.

 

18

 

12.                                 Miscellaneous.

 

12.1  Powers
of Attorney, etc.  The
Company will promptly execute and deliver, upon request, such proxies, powers
of attorney or other instruments as may be necessary or desirable for the
Custodian to provide, or to cause any Subcustodian to provide, custody
services.

 

12.2  Entire
Agreement.  Except as
specifically provided herein, this Agreement constitutes the entire agreement
between the Company and the Custodian and supersedes any other oral or written
agreements heretofore in effect between the Company and the Custodian with
respect to the subject matter hereof.  No provision
of this Agreement may be amended or terminated except by an instrument in
writing signed by the party against which enforcement of the amendment or
termination is sought.  In the event of a
conflict between the terms of this Agreement and the terms of a service level
agreement or other operating agreement in place between the parties from time
to time, the terms of this Agreement shall control.

 

12.3  Binding Effect;
Assignment.  This
Agreement shall be binding upon and shall inure to the benefit of the Custodian
and the Company and their successors and assignees, provided that the Company
may not assign this Agreement without the prior written consent of the Custodian.   Each party agrees that only the parties to
this agreement and/or their successors in interest shall have a right to
enforce the terms of this Agreement. 
Accordingly, no client of the Company or other third party shall have
any rights under this Agreement and such rights are explicitly disclaimed by
the parties.

 

12.4                           GOVERNING
LAW, JURISDICTION AND VENUE. 
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND BE GOVERNED BY
THE LAWS OF, THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAW OF SUCH STATE.  THE PARTIES HERETO
IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE FEDERAL COURTS LOCATED IN NEW YORK CITY.  THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR
PROCEEDING IN ANY OF THE AFORESAID COURTS AND ANY CLAIM THAT ANY SUCH ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  FURTHERMORE, EACH PARTY HERETO IRREVOCABLY
WAIVES ANY RIGHT THAT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION,  PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

12.5  Notices.  Notices and other writings contemplated by
this Agreement, other than Instructions, shall be

 

19

 

delivered (a) by hand, (b) by first class registered or
certified mail, postage prepaid, return receipt requested, (c) by a
nationally recognized overnight courier, or (d) by facsimile transmission,
provided that any notice or other writing sent by facsimile transmission shall
also be mailed, postage prepaid, to the party to whom such notice is
addressed.  All such notices shall be
addressed, as follows:

 

	
  If to the
  Company:

  
	
   

  
	
  420 Lexington Avenue

  
	
  New York, New York 10170

  
	
   

  
	
  Attn: Chief Operating Officer

  
	
   

  
	
  Telephone:

  	
  (   )

  
	
  Facsimile

  	
  (   )

  
	
   

  
	
  If to the Custodian:

  
	
   

  
	
  Brown Brothers Harriman & Co.

  
	
  40 Water Street

  
	
  Boston, Massachusetts 02109

  
	
  Attn: Senior Legal Officer,
  Investor Services

  
	
  Telephone:

  	
  (617) 772-XXXX

  
	
  Facsimile:

  	
  (617) 772-XXXX,

  

 

or such other address as the Company or the Custodian may have
designated in writing to the other.

 

12.6  Headings.  Paragraph headings included
herein are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof.

 

12.7   Severability. 
In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.

 

12.8  
Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original.  This Agreement shall
become effective when one or more counterparts have been signed and delivered
by the Company and the Custodian.  A
photocopy or telefax of the Agreement shall be acceptable evidence of  the existence of the Agreement and the
Custodian shall be protected in relying on the photocopy or telefax until the
Custodian has received the original of the Agreement.

 

12.9  Confidentiality.  The parties hereto agree that
each shall treat confidentially the terms and conditions of this Agreement and
all information provided by each party to the other regarding its business and
operations.  All confidential information
provided by a party hereto shall be used by any other party hereto solely for
the purpose of

 

20

 

rendering or obtaining services pursuant to this Agreement and, except as
may be required in carrying out this Agreement, shall not be disclosed to any
third party without the prior consent of such providing party.  The foregoing shall not be applicable to any
information that is publicly available when provided or thereafter becomes
publicly available other than through a breach of this Agreement, or that is
required to be disclosed by or to any bank examiner of the Custodian or any
Subcustodian, any Regulatory Authority, any auditor of the parties hereto, or
by judicial or administrative process or otherwise by Applicable Law.

 

12.10 
Tape-recording.  The
Company on behalf of its employees authorizes the Custodian to tape record any
and all telephonic or other oral instructions given to the Custodian by or on
behalf of the Company, including from any Authorized Person.  This authorization will remain in effect
until and unless revoked by the Company in writing.  The Company further agrees to solicit valid
written or other consent from any of its employees with respect to telephone
communications to the extent such consent is required by applicable law.

 

12.11  Counsel/
Certified Public Accountant.  In
fulfilling its duties hereunder, the Custodian shall be entitled to receive and
act upon the advice of (i) counsel and/or a certified public
accountant  regularly retained by the
Custodian in respect of such matters, (ii) counsel and/or a certified
public accountant for the Company or (iii) such counsel or certified
public accountant as the Company and the Custodian may agree upon, with respect
to all matters, and the Custodian shall be without liability for any action
reasonably taken or omitted pursuant to such advice.

 

12.12  Conflict.  Nothing contained in this
Agreement shall prevent the Custodian and its associates from (i) dealing
as a principal or an intermediary in the sale, purchase or loan of the Company’s
Investments to, or from the Custodian or its associates; (ii) acting as a
custodian, a subcustodian, a trustee, an agent, securities dealer, an
investment manager or in any other capacity for any other client whose
interests may be adverse to the interest of the Company; or (iii) buying,
holding, lending, and dealing in any way in any assets for the benefit of its
own account, or for the account of any other client whose interests may be
adverse to the Company notwithstanding that the same or similar assets may be
held or dealt in by, or for the account of the Company by the Custodian.  The Company hereby voluntarily consents to,
and waives any potential conflict of interest between the Custodian and/or its
associates and the Company, and agrees that:

 

12.12.1  the Custodian’s and/or its associates’
engagement in any such transaction shall not disqualify the Custodian from
continuing to perform as the custodian of the Company under this Agreement;

 

12.12.2  the Custodian and/or its associates shall not
be under any duty to disclose any information

 

21

 

in
connection with any such transaction to the Company;

 

12.12.3  the Custodian and/or its associates shall not
be liable to account to the Company for any profits or benefits made or derived
by or in connection with any such transaction; and

 

12.12.4  the Company shall use all reasonable efforts
to disclose this provision, among other provisions in this Agreement, to its
shareholders.

 

13.                                 Definitions.   The following defined terms will have the
respective meanings set forth below.

 

13.1  Advance(s) shall
mean any extension of credit by or through the Custodian or by or through any
Subcustodian and shall include, without limitation, amounts due to the
Custodian as the principal counterparty to any foreign exchange transaction
with the Company as described in Section 7.4.2 hereof, or paid to third
parties for account of the Company or in discharge of any expense, tax or other
item payable by the Company.

 

13.2                           Advance
Costs shall mean any Advance, interest on the Advance and any
related expenses, including without limitation any mark to market loss of the
Custodian or Subcustodian on any Investment to which Section 7.6.1
applies.

 

13.3 
Agency Account(s) shall mean any deposit account
opened on the books of a Subcustodian or other banking institution in
accordance with Section 7.1 hereof.

 

13.4  Agent(s) shall
have the meaning set forth in the last sentence of Section 6 hereof.

 

13.5  Applicable
Law shall mean with respect to each jurisdiction, all (a) laws,
statutes, treaties, regulations, guidelines (or their equivalents); (b) orders,
interpretations, licenses and permits; and (c) judgments, decrees,
injunctions, writs, orders and similar actions by a court of competent
jurisdiction, compliance with which is required or customarily observed in such
jurisdiction.

 

13.6  Authorized
Person(s) shall mean any person or entity authorized to
give Instructions on behalf of the Company in accordance with Section 4.1
hereof.

 

13.7  Book-entry
Agent shall mean an entity acting as agent for the issuer of
Investments for purposes of recording ownership or similar entitlement to
Investments, including without limitation a transfer agent or registrar.

 

13.8  Clearing
Corporation shall mean any entity or system established for
purposes of providing securities settlement and movement and associated  functions for a given market.

 

13.9 
Electronic and Online Services Schedule shall mean any
separate agreement entered into between the Custodian and the Company or its
authorized representative with respect to certain matters concerning certain
electronic

 

22

 

and online services as described therein and as may be made available
from time to time by the Custodian to the Company.

 

13.10  Electronic
Reports shall mean any reports prepared by the Custodian and
remitted to the Company or its authorized representative via the internet or electronic
mail.

 

13.11  Funds
Transfer Services Schedule shall mean any separate agreement
entered into between the Custodian and the Company or its authorized
representative with respect to certain matters concerning the processing of
payment orders from Principal Accounts of the Company.

 

13.12  Global Custody Network Listing shall mean the
Countries and Subcustodians approved for Investments in non-U.S. Markets.

 

13.13  Instruction(s) shall
have the meaning assigned in Section 4 hereof.

 

13.14  Investment
Advisor shall mean any person or entity who is an Authorized
Person to give Instructions with respect to the investment and reinvestment of
the Company’s Investments.

 

13.15  Investment(s) shall
mean any investment asset of the Company including without limitation:
securities, bonds, notes, and debentures as well as receivables, derivatives,
contractual rights or entitlements and other intangible assets, but shall not
include any Principal Account.

 

13.16  Margin
Account shall have the meaning set forth in Section 6.4
hereof.

 

13.17 
Principal Account(s)  shall mean deposit accounts of
the Company carried on the books of BBH&Co. as principal in accordance with
Section 7 hereof.

 

13.18 Safekeeping Account shall
mean an account established on the books of the Custodian or any Subcustodian
for purposes of segregating the interests of the Company (or clients of the
Custodian or Subcustodian) from the assets of the Custodian or any
Subcustodian.

 

13.19  Securities
Depository shall mean a central or book entry system or agency
established under Applicable Law for purposes of recording the ownership and/or
entitlement to investment securities for a given market.

 

13.20  Subcustodian(s) shall
mean each foreign bank appointed by the Custodian pursuant to Section 8
hereof, but shall not include Securities Depositories.

 

13.21 Tri-Party Agreement shall
have the meaning set forth in Section 6.4 hereof.

 

14.                                 Compensation.  The Company agrees to pay to the Custodian (a) a
fee in an amount set forth in the fee letter between the Company and the
Custodian in effect on the date hereof or as amended from time to time, and (b) all
out-

 

23

 

of-pocket expenses incurred by the Custodian, including the fees and
expenses of all Subcustodians, and payable from time to time.  Amounts payable by the Company under and
pursuant to this Section 14 shall be payable by wire transfer to the
Custodian at BBH&Co. in New York, New York.

 

15.                                 Termination.  This Agreement may be terminated by either
party in accordance with the provisions of this Section.  The provisions of this Agreement and any
other rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this Agreement.

 

15.1  Term,
Notice and Effect.  This
Agreement shall have an initial term of three (3) years  from the date hereof. 
Thereafter, this Agreement shall automatically renew for successive one (1) year
periods unless either party terminates this Agreement by written notice
effective no sooner than seventy-five (75) days 
following the date that notice to such effect shall be delivered to the
other party at its address set forth in Section 12.5 hereof.  Notwithstanding the foregoing provisions,
either party may terminate this Agreement at any time (a) for cause, which
is a material breach of the Agreement not cured within 60 days, in which case
termination  shall be effective upon
written receipt of notice by the non-terminating party, or (b) upon thirty
(30) days written notice to the other party in the event that the either party
is adjudged bankrupt or insolvent, or there shall be commenced against such
party a case under any applicable bankruptcy, insolvency, or other similar law
now or hereafter in effect.

 

15.2   Notice and Succession.   In the event a termination notice is given by a
party hereto, all reasonable costs and expenses associated with any required
systems, facilities, procedures, personnel, and other resourced modifications
as well as the movement of records and materials and the conversion thereof
shall be paid by the company for which Services shall cease to be performed
hereunder.  Furthermore, to the extent
that it appears impracticable given the circumstances to effect an orderly
delivery of the necessary and appropriate records of BBH to a successor within
the time specified in the notice of termination as aforesaid, BBH and the
Company agree that this Agreement shall remain in full force and effect for
such reasonable period as may be required to complete necessary arrangements
with a successor.

 

15.3 
Successor Custodian.  In
the event of the appointment of a successor custodian, it is agreed that the
Investments of the Company held by the Custodian or any Subcustodian shall be
delivered to the successor custodian in accordance with reasonable
Instructions.  The Custodian agrees to
cooperate with the Company in the execution of documents and performance of
other actions necessary or desirable in order to facilitate the succession of
the new custodian.  If no successor
custodian shall be appointed, the Custodian shall in like manner transfer the
Company’s 

 

24

 

Investments in accordance with Instructions.

 

15.4  Delayed
Succession.  If no
Instruction has been given as of the effective date of termination, Custodian
may at any time on or after such termination date and upon ten (10) consecutive
calendar days written notice to the Company either (a) deliver the
Investments of the Company held hereunder to the Company at the address
designated for receipt of notices hereunder; or (b) deliver any
Investments held hereunder to a bank or trust company having a capitalization
of $2M equivalent and operating under the Applicable Law of the jurisdiction
where such Investments are located, such delivery to be at the risk of the
Company.  In the event that Investments
or moneys of the Company remain in the custody of the Custodian or its
Subcustodians after the date of termination owing to the failure of the Company
to issue Instructions with respect to their disposition or owing to the fact
that such disposition could not be accomplished in accordance with such
Instructions despite diligent efforts of the Custodian, the Custodian shall be
entitled to compensation for its services with respect to such Investments and
moneys during such period as the Custodian or its Subcustodians retain
possession of such items  and the
provisions of this Agreement shall remain in full force and effect until
disposition in accordance with this Section is accomplished.

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed as of the date first above written.

 

The undersigned acknowledges that (I/we) have received a copy of this
document.

 

 

	
  BROWN
  BROTHERS HARRIMAN & CO.

  	
   

  	
  AIRSHARESÔ EU CARBON ALLOWANCES FUND

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Timothy J. Connelly

  	
   

  	
   

  	
  By:

  	
  /s/ Anthony Dudzinski

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Timothy J.
  Connelly

  	
   

  	
  Name: Anthony
  Dudzinski

  
	
  Title: Partner

  	
   

  	
  Title: CEO

  
	
  Date: 4-8-08

  	
   

  	
  Date: 4-8-08

  
							

 

25

 

FUNDS
TRANSFER SERVICES SCHEDULE TO CUSTODIAN AGREEMENT

 

1.                                       Execution of Payment Orders. 
Brown Brothers Harriman & Co. (the Custodian)
is hereby instructed by AIRSHARESTM EU CARBON
ALLOWANCES FUND (the Company) to
execute each payment order, whether denominated in United States dollars or
other applicable currencies, received by the Custodian in the Company’s name as
sender and authorized and confirmed by an Authorized Person as defined in a
Custodian Agreement dated as of
                            ,
2007 by and between the Custodian and the Company, as amended or restated from
time thereafter (the Agreement),
provided that the Company has sufficient available funds on deposit in a
Principal Account as defined in the Agreement and provided that the order (i) is
received by the Custodian in the manner specified in this Funds Transfer
Services Schedule or any amendment hereafter; (ii) complies with any
written instructions and restrictions of the Company as set forth in this Funds
Transfer Services Schedule or any amendment hereafter; (iii) is authorized
by the Company or is verified by the Custodian in compliance with a security
procedure set forth in Paragraph 2 below for verifying the authenticity of a
funds transfer communication sent to the Custodian in the name of the Company
or for the detection of errors set forth in any such communication; and (iv) contains
sufficient data to enable the Custodian to process such transfer.

 

2.                                       Security Procedure. 
The Company hereby elects to use the procedure selected below as its
security procedure (the Security Procedure).
The Security Procedure will be used by the Custodian to verify the authenticity
of a payment order or a communication amending or canceling a payment order.
The Custodian will act on instructions received provided the instruction is
authenticated by the Security Procedure. The Company agrees and acknowledges in
connection with (i) the size, type and frequency of payment orders
normally issued or expected to be issued by the Company to the Custodian, (ii) all
of the security procedures offered to the Company by the Custodian, and (iii) the
usual security procedures used by customers and receiving banks similarly
situated, that authentication through the Security Procedure shall be deemed
commercially reasonable for the authentication of all payment orders submitted
to the Custodian.   The Company hereby
elects (please choose one) the following
Security Procedure as described below:

 

	
  o

  	
   

  	
  BIDS and BIDS Worldview
  Payment Products.
  BIDS and BIDS Worldview Payment Products, are on-line payment order
  authorization facilities with built-in authentication procedures. The
  Custodian and the Company shall each be responsible for maintaining the
  confidentiality of passwords or other codes to be used by them in connection
  with BIDS. The Custodian will act on instructions received through BIDS
  without duty of further confirmation unless the Company notifies the
  Custodian that its password is not secure.

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  SWIFT. The Custodian and the Company shall
  comply with SWIFT’s authentication procedures. The Custodian will act on
  instructions received via SWIFT provided the instruction is authenticated by
  the SWIFT system.

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  Tested Telex. The Custodian will accept
  payment orders sent by tested telex, provided the test key matches the
  algorithmic key the Custodian and Company have agreed to use.

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  Computer Transmission. The Custodian
  is able to accept transmissions sent from the Company’s computer facilities
  to the Custodian’s computer facilities provided such transmissions are
  encrypted and digitally certified or are otherwise authenticated in a
  reasonable manner based on available technology. Such procedures shall be
  established in an operating protocol between the Custodian and the Company.

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  Telefax Instructions. A payment order transmitted to the Custodian by
  telefax transmission shall transmitted by the Company to a telephone number
  specified from time to time by the Custodian for such purposes. If it detects
  no discrepancies, the Custodian will follow one of the procedures below:

  

 

1.                     If the telefax requests a repetitive payment order,
the Custodian may call the Company at its 

 

26

 

last known
telephone number, request to speak to the Company or Authorized Person, and
confirm the authorization and details of the payment order (a Callback); or

 

2.  If
the telefax requests a non-repetitive order, the Custodian will perform a
Callback.

 

All faxes must be accompanied by a fax cover sheet
which indicates the sender’s name, Company name, telephone number, fax number,
number of pages, and number of transactions or instructions attached.

 

o                                    Telephonic. A telephonic payment order shall be called into the
Custodian at the telephone number designated from time to time by the Custodian
for that purpose. The caller shall identify herself/himself as an Authorized
Person.  The Custodian shall obtain the
payment order data from the caller.  The
Custodian will follow one of the procedures below:

 

1.                     If a telephonic repetitive payment order, the
Custodian may perform a Callback; or

 

 

2.                     If a telephonic non-repetitive payment order, the
Custodian will perform a Callback.

 

 

In the event the Company
chooses a procedure which is not a Security Procedure as described above, the
Company agrees to be bound by any payment order (whether or not authorized)
issued in its name and accepted by the Custodian in compliance with the
procedure selected by the Company.

 

3.         Rejection of
Payment Orders.   The Custodian shall
give the Company timely notice of the Custodian’s rejection of a payment order.
Such notice may be given in writing or orally by telephone, each of which is
hereby deemed commercially reasonable. 
In the event the Custodian fails to execute a properly executable
payment order and fails to give the Company notice of the Custodian’s
non-execution, the Custodian shall be liable only for the Company’s actual
damages and only to the extent that such damages are recoverable under UCC 4A
(as defined in Paragraph 7 below). 
Notwithstanding anything in this Funds Transfer Services Schedule and
the Agreement to the contrary, the Custodian shall in no event be liable for
any consequential or special damages under this Funds Transfer Services
Schedule, whether or not such damages relate to services covered by UCC 4A,
even if the Custodian has been advised of the possibility of such damages.
Whenever compensation in the form of interest is payable by the Custodian to
the Company pursuant to this Funds Transfer Services Schedule, such
compensation will be payable in accordance with UCC 4A.

 

4.       Cancellation of
Payment Orders.   The Company may
cancel a payment order but the Custodian shall have no liability for the
Custodian’s failure to act on a cancellation instruction unless the Custodian
has received such cancellation instruction at a time and in a manner affording
the Custodian reasonable opportunity to act prior to the Custodian’s execution
of the order.  Any cancellation shall be
sent and confirmed in the manner set forth in Paragraph 2 above.

 

27

 

5.                                       Responsibility for the Detection of
Errors and Unauthorized Payment Orders.   Except as
may be provided, the Custodian is not responsible for detecting any Company
error contained in any payment order sent by the Company to the Custodian. In
the event that the Company’s payment order to the Custodian either (i) identifies
the beneficiary by both a name and an identifying or bank account number and
the name and number identify different persons or entities, or (ii) identifies
any bank by both a name and an identifying number and the number identifies a
person or entity different from the bank identified by name, execution of the
payment order, payment to the beneficiary, cancellation of the payment order or
actions taken by any bank in respect of such payment order may be made solely
on the basis of the number. The Custodian shall not be liable for interest on
the amount of any payment order that was not authorized or was erroneously
executed unless the Company so notifies the Custodian within thirty (30)
business days following the Company’s receipt of notice that such payment order
had been processed.  If a payment order
in the name of the Company and accepted by the Custodian was not authorized by
the Company, the liability of the parties will be governed by the applicable
provisions of UCC 4A.

 

6.                                       Laws and Regulations.  
The rights and obligations of the Custodian and the Company with respect
to any payment order executed pursuant to this Funds Transfer Services Schedule
will be governed by any applicable laws, regulations, circulars and funds
transfer system rules, the laws and regulations of the United States of America
and of other relevant countries including exchange control regulations and
limitations on dealings or other sanctions, and including without limitation
those sanctions imposed under the law of the United States of America by the
Office of Foreign Assets Control.  Any
taxes, fines, costs, charges or fees imposed by relevant authorities on such
transactions shall be for the account of the Company.

 

7.                                       Miscellaneous.  
All accounts opened by the Company or its authorized agents at the
Custodian subsequent to the date hereof shall be governed by this Funds
Transfer Schedule.  All terms used in
this Funds Transfer Services Schedule shall have the meaning set forth in Article 4A
of the Uniform Commercial Code as currently in effect in the State of New York
(UCC 4A) unless otherwise set forth herein.
The terms and conditions of this Funds Transfer Services Schedule are in
addition to, and do not modify or otherwise affect, the terms and conditions of
the Agreement and any other agreement or arrangement between the parties
hereto.

 

8.                                       Indemnification.  
The Custodian does not recommend the sending of instructions by telefax
or telephonic means as provided in Paragraph 2. 
BY ELECTING TO SEND INSTRUCTIONS BY TELEFAX OR
TELEPHONIC MEANS, THE COMPANY AGREES TO INDEMNIFY THE CUSTODIAN AND ITS
PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES THEREFROM.

 

 

OPTIONAL: 
The Custodian will perform a Callback if instructions are sent by
telefax or telephonic means as provided in Paragraph 2. THE COMPANY
MAY, AT ITS OWN RISK AND BY HEREBY AGREEING TO INDEMNIFY THE CUSTODIAN AND ITS
PARTNERS, OFFICERS AND EMPLOYEES FOR ALL LOSSES THEREFROM, ELECT TO
WAIVE A CALLBACK BY THE CUSTODIAN BY INITIALING HERE:

 

 

The
undersigned acknowledges that (I/we) have received a copy of this document.

 

Accepted and agreed:

 

 

	
  BROWN BROTHERS
  HARRIMAN & CO.

  	
   

  	
  AIRSHARESÔ EU CARBON ALLOWANCES FUND

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
  Title:

  
	
  Date:

  	
   

  	
  Date:

  
							

 

28

 

ELECTRONIC
AND ON-LINE SERVICES

SCHEDULE

 

This Electronic and
On-Line Services Schedule (this Schedule) to a
Custodian Agreement dated as of
                                          (as
amended from time to time hereafter, the Agreement) by
and between Brown Brothers Harriman & Co. (the
Custodian) and AIRSHARESÔ EU CARBON ALLOWANCES FUND (the Company),
provides general provisions governing the Company’s use of and access to the
Services (as hereinafter defined) provided to the Company by the Custodian via
the Internet (at www.bbhco.com or such other URL as the Custodian may instruct
the Company to use to access the custodian’s products) and via a
direct dial-up connection between  the
Custodian’s and the Company’s computers, as of
                                ,
          , 2007 (the Effective Date). Use of the Services constitutes acceptance
of the terms and conditions of this Schedule, any Appendices hereto, the Terms
and Conditions posted on the Custodian’s web site, and any terms and conditions
specifically governing a particular Service or the Custodian’s other products,
which may be set forth in the Agreement or in a separate related agreement
(collectively, the Related Agreements).

 

1.               General Terms.

 

The Company will be
granted access to the Custodian’s suite of online products, which may include,
but shall not be limited to the following services via the Internet or dial-up
connection (each separate service is a Service;
collectively referred to as the Services):

 

1.1.                BIDS® and BIDS WorldView, a system for
effectuating securities and fund trade instruction and execution, processing
and handling instructions, and for the input and retrieval of other
information;

 

1.2.                F/X WorldView, a system for executing
foreign exchange trades;

 

1.3.                Fund WorldView, a system for receiving
fund and prospectus information;

 

1.4.                BBHCOnnect, a system for placing
securities trade instructions and following the status and detail of trades;

 

1.5.                ActionViewSM, a system for
receiving certain corporate action information;

 

1.6.                Risk View, an interactive portfolio risk
analysis tool; and

 

1.7.                Such other services as the Custodian
shall from time to time offer.

 

2.               Security / Passwords.

 

2.1.                A digital certificate and/or an
encryption key may be required to access certain Services.  The Company may apply for a digital
certificate and/or an encryption key by following the procedures set forth at
http://www.bbh.com/certs/.  The Company also will need an
identification code (ID) and
password(s) (Password) to
access the Services.

 

2.2.                The Company agrees to safeguard the
Company’s digital certificate and/or encryption key, ID, and Password and not
to give or make available, intentionally or otherwise, the Company’s digital
certificate, ID, and/or Password to any unauthorized person.  The Company must immediately notify the
Custodian in writing if the Company believes that the Company’s digital
certificate and/or encryption key, Password, or ID has been compromised or if
the Company suspects unauthorized access to the Company’s  account by means of the Services or
otherwise, or when a person to whom a digital certificate and/or an encryption
key, Password, or ID has been assigned leaves or is no longer permitted to
access the Services.

 

2.3.                The Custodian will not be responsible for
any breach of security, or for any unauthorized trading or theft by any third
party, caused by the Company’s failure (be it intentional, unintentional, or
negligent) to maintain the confidentiality of the Company’s  ID and/or Password and/or the security of the
Company’s  digital certificate and/or
encryption key.

 

29

 

3.               Instructions.

 

3.1.                Instructions under this Schedule shall be
provided as designated in the Related Agreements

 

3.2.                The following additional provisions apply
to Instructions provided via the Services:

 

a.                        Instructions sent by electronic mail will
not be accepted or acted upon.

 

b.                       The Company authorizes the Custodian to
act upon Instructions received through the Services utilizing the Company’s
digital certificate, ID, and/or Password as though they were duly authorized
written instructions, without any duty of verification or inquiry on the
Custodian’s part, and agree to hold the Custodian harmless for any losses the
Company experiences as a result.

 

c.                        From time to time, the temporary
unavailability of third party telecommunications or computer systems required
by the Services may result in a delay in processing Instructions.  In such an event, the Custodian shall not be
liable to the Company or any third party for any liabilities, losses, claims,
costs, damages, penalties, fines, obligations, or expenses of any kind
(including without limitation, reasonable attorneys’, accountants’, consultants’,
or experts’ fees and disbursements) that the Company experiences due to such a
delay.

 

4.               Electronic Documents.

 

The Custodian may make
periodic statements, disclosures, notices, and other documents available to the
Company electronically, and, subject to any delivery and receipt verification
procedures required by law, the Company agrees to receive such documents electronically
and to check the statements for accuracy. 
If the Company believes any such statement contains incorrect
information, the Company must follow the procedures set forth in the Related
Agreement(s).

 

5.               Malicious Code.

 

The
Company understands and agrees that it will be responsible for the introduction
(by the Company,  the Company’s
employees, agents, or representatives) into the Services, whether intentional
or unintentional, of (i) any virus or other code, program, or sub-program
that damages or interferes with the operation of the computer system containing
the code, program or sub-program, or halts, disables, or interferes with the
operation of the Services themselves; or (ii) any device, method, or token
whose knowing or intended purpose is to permit any person to circumvent the
normal security of the Services or the system containing the software code for
the Services (Malicious Code).  The Company agrees to take all necessary
actions and precautions to prevent the introduction and proliferation of any
Malicious Code into those systems that interact with the Services.

 

6.               Indemnification.

 

For avoidance of doubt,
The Company  hereby agree that the
provisions in the Related Agreement(s) related to the Company’s
indemnification of the Custodian and any limitations on the Custodian’s
liability and responsibilities to the Company shall be applicable to this
Agreement, and are hereby expressly incorporated herein. The Company agrees
that the Services are comprised of telecommunications and computer systems, and
that it is possible that Instructions, information, transactions, or account
reports might be added to, changed, or omitted by electronic or programming
malfunction, unauthorized access, or other failure of the systems which
comprise the Services, despite the security features that have been designed
into the Services. The Company agrees that the Custodian will not be liable for
any action taken or not taken in complying with the terms of this Schedule,
except for willful misconduct or gross negligence.  The provisions of this paragraph shall
survive the termination of this Schedule and the Related Agreements.

 

7.               Payment.

 

The Company may be
charged for services hereunder as set forth in a fee schedule from time to time
agreed by the Custodian.

 

30

 

8.               Term/Termination.

 

8.1.                This Schedule is effective as of the date
the Company signs it or first uses the Services, whichever is first, and
continues in effect until such time as either the Company or the Custodian
terminate the Schedule in accordance with this Section 8 and/or until the
Company’s off-line use of the Services is terminated.

 

8.2.                The Custodian may terminate the Company’s
access to the Services at any time, for any reason, with five (5) business
days prior notice; provided that the Custodian may terminate the Company’s
access to the Services with no prior notice (i) if the Company’s account
with the Custodian is closed, (ii) if the Company fails to comply with any
of the terms of this Agreement, (iii) if the Custodian believes that the
Company’s continued access to the Services poses a security risk, or (iv) if
the Custodian believes that the Company is violating or has violated applicable
laws, and the Custodian will not be liable for any loss the Company may
experience as a result of such termination. 
The Company may terminate the Fund’s access to the Services at any time
by giving the Custodian ten (10) business days notice.  Upon termination, the Custodian will cancel
all the Company’s Passwords and IDs and any in-process or pending Instructions
will be carried out or cancelled, at the Custodian’s sole discretion.

 

9.               Miscellaneous.

 

9.1.                Notices. 
All notices, requests, and demands (other than routine operational
communications, such as Instructions) shall be in such form and effect as
provided in the Related Agreement(s).

 

9.2.                Inconsistent Provisions. 
Each Service may be governed by separate terms and conditions in
addition to this Schedule and the Related Agreement(s).  Except where specifically provided to the
contrary in this Schedule, in the event that such separate terms and conditions
conflict with this Schedule and the Related Agreement(s), the provisions of
this Schedule shall prevail to the extent this Schedule applies to the transaction
in question.

 

9.3.                Binding Effect; Assignment;
Severability.  This Schedule shall be binding on you, your
employees, officers and agents.  We may
assign or delegate our rights and duties under this Schedule at any time
without notice to you.  Your rights under
this Schedule may not be assigned without our prior written consent. In the
event that any provision of this Schedule conflicts with the law under which
this Schedule is to be construed or if any such provision is held invalid or
unenforceable by a court with jurisdiction over you and us, such provision
shall be deemed to be restated to effectuate as nearly as possible the purposes
of the Schedule in accordance with applicable law.  The remaining provisions of this Schedule and
the application of the challenged provision to persons or circumstances other
than those as to which it is invalid or unenforceable shall not be affected
thereby, and each such provision shall be valid and enforceable to the full
extent permitted by law.

 

9.4.                Choice of Law; Jury Trial. This Schedule shall be governed by and
construed, and the legal relations between the parties shall be determined, in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws. Each party agrees to waive its right to trial
by jury in any action or proceeding based upon or related to this
Agreement.  The parties agree that all
actions and proceedings based upon or relating to this Schedule shall be litigated
exclusively in the federal and state courts located within New York City, New
York.

 

31

 

The
undersigned acknowledges that the Company has received a copy of this document

 

	
   

  	
   

  	
  AIRSHARESÔ EU CARBON ALLOWANCES FUND

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  

 

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