EX - 99.(g)(1)
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of April 1, 2003, by and between MERCANTILE
FUNDS, INC., a corporation organized under the laws of the State of Maryland
(the "Company"), and FIFTH THIRD BANK, a banking company organized under the
laws of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Company desires that the Securities and cash of each of
the investment portfolios identified in Exhibit A hereto (such investment
portfolios are individually referred to herein as a "Fund" and collectively as
the "Funds"), be held and administered by the Custodian pursuant to this
Agreement; and
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board to give Oral Instructions and Written
Instructions on behalf of the Company and named in Exhibit B hereto or in such
resolutions of the Board, certified by an Officer, as may be received by the
Custodian from time to time.
1.2 "Board" shall mean the Directors from time to time serving
under the Company's Articles of Incorporation, dated February 23, 1989, as from
time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular Xx. 000, 00 XXX 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement
day by The New York Stock Exchange, Inc. and any other day for which a Fund
computes its net asset value.
1.5 "Officer" shall mean the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Company.
1.6 "Oral Instructions" shall mean instructions orally transmitted
to and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person; (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business; and (iii) orally confirmed by the Custodian. The Company shall
cause all Oral Instructions to be confirmed by Written Instructions. If such
Written Instructions confirming Oral Instructions are not received by the
Custodian prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Company. If Oral Instructions
vary from the Written Instructions that purport to confirm them, the Custodian
shall notify the Company of such variance but such Oral Instructions will govern
unless the Custodian has not yet acted.
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1.7 "Custody Account" shall mean any account in the name of the
Company, which is provided for in Section 3.2 below.
1.8 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.9 "Securities Depository" shall mean The Depository Trust
Company ("DTC") and any other clearing agency registered with the Securities and
Exchange Commission (the "SEC") under Section 17A of the Securities and Exchange
Act of 1934 (the "1934 Act") that acts as a system for the central handling of
Securities where all Securities of any particular class or series of an issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of the Securities.
1.10 "Securities" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities, other
money market instruments or other obligations, and any certificates, receipts,
warrants or other instruments or documents representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that the
Custodian has the facilities to clear and to service.
1.11 "Shares" shall mean the shares of common stock issued by the
Company.
1.12 "Written Instructions" shall mean (i) written communications
actually received by the Custodian and signed by one or more Authorized Persons;
(ii) communications by telex or any other such system from a person or persons
reasonably believed by the Custodian to be an Authorized Person or Persons; or
(iii) communications transmitted electronically through the Institutional
Delivery System (IDS), or any other similar electronic instruction system
acceptable to Custodian and approved by resolutions of the Board, a copy of
which, certified by an Officer, shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Company hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Company at any time during the period of this Agreement, provided that
such Securities or cash at all times shall be and remain the property of the
Company.
2.2 Acceptance. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth and
in accordance with the 1940 Act. Except as specifically set forth herein, the
Custodian shall have no liability and assumes no responsibly for any
non-compliance by the Company or a Fund of any laws, rules or regulations.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of the Company, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain in its
trust department a custody account in the name of each Fund, subject only to
draft or order of the Custodian, in which the Custodian shall enter and carry
all Securities, cash and other assets of the Fund that are delivered to it.
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3.3 Appointment of Agents. In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company that has
been approved by the Board and is qualified to act as a custodian under the 1940
Act, as sub-custodian to hold Securities and cash of the Funds and to carry out
such other provisions of this Agreement as it may determine, and may also open
and maintain one or more banking accounts with such a bank or trust company (any
such accounts to be in the name of the Custodian and subject only to its draft
or order), provided, however, that the appointment of any such agent shall not
relieve the Custodian of any of its obligations or liabilities under this
Agreement. The Custodian shall require any sub-custodian appointed pursuant to
this Section 3.3 to exercise due care in accordance with reasonable commercial
standards in discharging the duties described above.
3.4 Delivery of Assets to Custodian. The Fund shall deliver, or
cause to be delivered, to the Custodian all of the Fund's Securities, cash and
other assets, including (a) all payments of income, payments of principal and
capital distributions received by the Fund with respect to such Securities, cash
or other assets owned by the Fund at any time during the period of this
Agreement; and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian
may deposit and/or maintain Securities of the Funds in a Securities Depository
or in a Book-Entry System, subject to the following provisions:
(a) Securities of the Fund kept in a Book-Entry
System or Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-Entry
System or Securities Depository that includes only assets held
by the Custodian as a fiduciary, custodian or otherwise for
customers.
(b) If Securities purchased by the Fund are to
be held in a Book-Entry System or Securities Depository, the
Custodian shall pay for such Securities upon (i) receipt of
advice from the Book-Entry System or Securities Depository
that such Securities have been transferred to the Depository
Account; and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a
Book-Entry System or Securities Depository, the Custodian
shall transfer such Securities upon (i) receipt of advice from
the Book-Entry System or Securities depository that payment
for such Securities has been transferred to the Depository
Account; and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund.
(c) Upon request, the Custodian shall provide
the Fund with copies of any report (obtained by the Custodian
from a Book-Entry System or Securities Depository in which
Securities of the Fund are kept) on the internal accounting
controls and procedures for safeguarding Securities deposited
in such Book-Entry System or Securities Depository.
(d) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Company
for any loss or damage to the Company resulting (i) from the
use of a Book-Entry System or Securities Depository by reason
of any negligence or willful misconduct on the part of
Custodian or any sub-custodian appointed pursuant to Section
3.3 above or any of its or their employees; or (ii) from
failure of the Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-Entry
System or Securities Depository. At its election, the Company
shall be subrogated to the rights of the Custodian with
respect to any claim against a Book-Entry System or Securities
Depository or any other person for any loss or damage to the
Funds arising from the use of such Book-Entry System or
Securities Depository, if and to the extent that the Company
has not been made whole for any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund's Custody
Account, but only in the following cases:
(a) For the purchase of Securities for the Fund,
but only upon compliance with Section 4.1 of this Agreement
and only (i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian
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(or any sub-custodian appointed pursuant to Section 3.3 above)
of such Securities registered as provided in Section 3.9 below
in proper form for transfer, or if the purchase of such
Securities is effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set
forth in Section 3.5 above; (ii) in the case of options on
Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of
futures contracts and options on futures contracts, against
delivery to the Custodian (or such sub-custodian) of evidence
of title thereto in favor of the Company or any nominee
referred to in Section 3.9 below; or (iv) in the case of
repurchase or reverse repurchase agreements entered into
between the Company and a bank that is a member of the Federal
Reserve System or between the Company and a primary dealer in
U.S. government securities, against delivery of the purchased
Securities either in certificate form or through an entry
crediting the Custodian's account or the account of any
sub-custodian at a Book-Entry System or Securities Depository
for the account of the Fund with such Securities;
(b) In connection with the conversion, exchange
or surrender, as set forth in Section 3.7(f) below, of
Securities owned by the Fund;
(c) For the payment of any dividends or capital
gain distributions declared by the Fund;
(d) In payment of the redemption price of Shares
as provided in Article V below;
(e) For the payment of any expense or liability
incurred by the Company, including but not limited to the
following payments for the account of a Fund: interest; taxes;
administration, investment management, investment advisory,
accounting, auditing, transfer agent, custodian, trustee and
legal fees; and other operating expenses of a Fund; in all
cases, whether or not such expenses are to be in whole or in
part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the
provisions of any agreement among the Company, the Custodian
and a broker-dealer registered under the 1934 Act and a member
of NASD, relating to compliance with rules of The Options
Clearing Corporation (the "OCC") and of any registered
national securities exchange (or of any similar organization
or organizations) regarding escrow or other arrangements in
connection with transactions by the Company;
(g) For transfer in accordance with the
provisions of any agreement among the Company, the Custodian,
and a futures commission merchant registered under the
Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission (the "CFTC")
and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Company;
(h) For the funding of any uncertificated time
deposit or other interest-bearing account with any banking
institution (including the Custodian), which deposit or
account has a term of one year or less; or
(i) For any other proper purposes, but only upon
receipt, in addition to Proper Instructions, of a copy of a
resolution of the Board, certified by an Officer, specifying
the amount and purpose of such payment, declaring such purpose
to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall release and deliver
Securities from a Custody Account, but only in the following cases:
(a) Upon the sale of Securities for the account
of a Fund but only against receipt of payment therefor in
cash, by certified or cashiers check or bank credit;
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(b) In the case of a sale effected through a
Book-Entry System or Securities Depository, in accordance with
the provisions of Section 3.5 above;
(c) To an offeror's depository agent in
connection with tender or other similar offers for Securities
of a Fund; provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for
transfer into the name of the Company, the Custodian or any
sub-custodian appointed pursuant to Section 3.3 above, or of
any nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other
evidence representing the same aggregate face amount or number
of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;
(e) To the broker selling Securities, for
examination in accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any
plan of merger, consolidation, recapitalization,
reorganization or readjustment of the issuer of such
Securities, or pursuant to provisions for conversion contained
in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in
connection with the issuance or cancellation of depository
receipts; provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to
any repurchase or reverse repurchase agreement entered into by
a Fund;
(h) In the case of warrants, rights or similar
Securities, upon the exercise thereof, provided that, in any
such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(i) For delivery in connection with any loans of
Securities of a Fund, but only against receipt of such
collateral as the Company shall have specified to the
Custodian in Proper Instructions;
(j) For delivery as security in connection with
any borrowings by the Company on behalf of a Fund requiring a
pledge of assets by such Fund, but only against receipt by the
Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Company or a Fund;
(l) For delivery in accordance with the
provisions of any agreement among the Company, the Custodian
and a broker-dealer registered under the 1934 Act and a member
of NASD, relating to compliance with the rules of the OCC and
of any registered national securities exchange (or of any
similar organization or organizations) regarding escrow or
other arrangements in connection with transactions by the
Company on behalf of a Fund;
(m) For delivery in accordance with the
provisions of any agreement among the Company on behalf of a
Fund, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the CFTC and/or any contract
market (or any similar organization or organizations)
regarding account deposits in connection with transactions by
the Company on behalf of a Fund; or
(n) For any other proper corporate purposes, but
only upon receipt, in addition to Proper Instructions, of a
copy of a resolution of the Board, certified by an Officer,
specifying the
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Securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise
instructed by the Company, the Custodian shall, with respect to all Securities
held for a Fund:
(a) Subject to Section 7.4 below, collect on a
timely basis all income and other payments to which the
Company is entitled either by law or pursuant to custom in the
securities business;
(b) Present for payment and, subject to Section
7.4 below, collect on a timely basis the amount payable upon
all Securities that may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the
Company, checks, drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in
temporary form for Securities in definitive form;
(e) Execute, as custodian, any necessary
declarations or certificates of ownership under the federal
income tax laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and submit
reports to the Internal Revenue Service ("IRS") and to the
Company at such time, in such manner and containing such
information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with
respect to Securities held therein, through a Book-Entry
System or Securities Depository, all rights and similar
securities issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed
in Proper Instructions, attend to all non-discretionary
details in connection with sale, exchange, substitution,
purchase, transfer and other dealings with Securities and
assets of the Fund.
3.9 Registration and Transfer of Securities. All Securities held
for a Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Company on behalf of a Fund, if
eligible therefor. All other Securities held for a Fund may be registered in the
name of the Company on behalf of such Fund, the Custodian, or any sub-custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof; provided, however, that such Securities are held
specifically for the account of the Company on behalf of a Fund. The Company
shall furnish to the Custodian appropriate instruments to enable the Custodian
to hold or deliver in proper form for transfer, or to register in the name of
any of the nominees hereinabove referred to or in the name of a Book-Entry
System or Securities Depository, any Securities registered in the name of a
Fund.
3.10 Records.
(a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property
held for the Company, including (i) journals or other records of
original entry containing an itemized daily record in detail of all
receipts and deliveries of Securities and all receipts and
disbursements of cash; (ii) ledgers (or other records) reflecting (A)
Securities in transfer, (B) Securities in physical possession, (C)
monies and Securities borrowed and monies and Securities loaned
(together with a record of the collateral therefor and substitutions of
such collateral), (D) dividends and interest received, and (E)
dividends receivable and interest accrued; and (iii) canceled checks
and bank records
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related thereto. The Custodian shall keep such other books and records
of the Company as the Company shall reasonably request, or as may be
required by the 1940 Act, including, but not limited to Section 31 of
the 1940 Act and Rule 31a-1 and Rule 31a-2 `thereunder.
(b) All such books and records maintained by the
Custodian shall (i) be maintained in a form acceptable to the Company
and in compliance with rules and regulations of the SEC; (ii) be the
property of the Company and at all times during the regular business
hours of the Custodian be made available upon request for inspection by
duly authorized officers, employees or agents of the Company and
employees or agents of the SEC; and (iii) if required to be maintained
by Rule 31a-1 under the 1940 Act, be preserved for the periods
prescribed in Rule 31a-2 under the 0000 Xxx.
3.11 Fund Reports by Custodian. The Custodian shall furnish the
Company with a daily activity statement by Fund and a summary of all transfers
to or from the Custody Account on the day following such transfers. At least
monthly and from time to time, the Custodian shall furnish the Company with a
detailed statement, by Fund, of the Securities and moneys held for the Company
under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the
Company with such reports, as the Company may reasonably request from time to
time: (a) on the internal accounting controls and procedures for safeguarding
Securities that are employed by the Custodian or any sub-custodian appointed
pursuant to Section 3.3 above; and (b) on the financial strength of the
Custodian.
3.13 Proxies and Other Materials. The Custodian shall cause all
proxies if any, relating to Securities that are not registered in the name of a
Fund, to be promptly executed by the registered holder of such Securities,
without indication of the manner in which such proxies are to be voted, and
shall include all other proxy materials, if any, and shall promptly deliver to
the Company or its designee such proxies, all proxy soliciting materials, which
should include all other proxy materials, if any, and all notices relating to
such Securities.
3.14 Information on Corporate Actions. The Custodian will promptly
notify the Company of corporate actions, limited to those Securities registered
in nominee name and to those Securities held in a Depository Account or by a
sub-custodian. The Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Daily Card Service, X.X. Xxxxx
Called Bond Service, DTC, or received by first class mail from the agent. For
market announcements not yet received and distributed by the Custodian's
services, the Company will inform its custody representative with appropriate
instructions. The Custodian will, upon receipt of the Company's response within
the required deadline, affect such action for receipt or payment for the
Company. For those responses received after the deadline, the Custodian will
affect such action for receipt or payment, subject to the limitations of the
agent(s) affecting such actions. The Custodian will promptly notify the Company
for put options only if the notice is received by first class mail from the
agent. The Company will provide or cause to be provided to the Custodian all
relevant information contained in the prospectus for any security that has
unique put/option provisions and provide the Custodian with specific tender
instructions at least ten business days prior to the beginning date of the
tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of
Securities for the Company, Written Instructions shall be delivered to the
Custodian, specifying (a) the name of the issuer or writer of such Securities,
and the title or other description thereof; (b) the number of shares, principal
amount (and accrued interest, if any) or other units purchased; (c) the date of
purchase and settlement; (d) the purchase price per unit; (e) the total amount
payable upon such purchase; (f) the name of the person to whom such amount is
payable; and (g) the series to which the Securities are to be allocated. The
Custodian shall upon receipt of such Securities purchased by a Fund pay out of
the moneys held for the account of such Fund the total amount specified in such
Written Instructions to the person named therein. The Custodian shall not be
under any obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Custody Account there is insufficient
cash available to the Fund for which such purchase was made.
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4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of Securities
for a Fund is made by the Custodian in advance of receipt for the account of the
Fund of the Securities purchased but in the absence of specific Proper
Instructions to so pay in advance, the Custodian shall be liable to the Fund for
such Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof; (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold; (c) the date of sale and settlement; (d)
the sale price per unit; (e) the total amount payable upon such sale; and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Company as specified in such Written Instructions,
the Custodian shall deliver such Securities to the person specified in such
Written Instructions. Subject to the foregoing, the Custodian may accept payment
in such form as shall be satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing among dealers in
Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above
or any other provision of this Agreement, the Custodian, when instructed by
Proper Instructions to deliver Securities against payment, shall be entitled, if
in accordance with generally accepted market practice, to deliver such
Securities prior to actual receipt of final payment therefor. In any such case,
the Company shall bear the risk that final payment for such Securities may not
be made or that such Securities may be returned or otherwise held or disposed of
by or through the person to whom they were delivered, and the Custodian,
provided it has exercised reasonable care, shall have no liability for any of
the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and
from time to time, the Custodian may credit the relevant Custody Account, prior
to actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities that it has been instructed to deliver against payment; (ii) proceeds
from the redemption of Securities or other assets of the Company; and (iii)
income from cash, Securities or other assets of the Company. Any such credit
shall be conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit the Company to use
funds so credited to its Custody Account in anticipation of actual receipt of
final payment. Any such funds shall be repayable immediately upon demand made by
the Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in
its sole discretion and from time to time, advance funds to the Company to
facilitate the settlement of Company transactions on behalf of a Fund in its
Custody Account. Any such advance shall be repayable immediately upon demand
made by the Custodian. The Custodian shall not require the Fund to pledge any of
its securities as collateral for any such funds that it may from time to time
advance to the Fund.
ARTICLE V
REDEMPTION OF COMPANY SHARES
Transfer of Funds. From such funds as may be available for the purpose
in the relevant Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Company may designate with respect to such amount in such Proper
Instructions. Upon effecting payment or distribution in accordance with Proper
Instructions, the Custodian shall not be under any obligation or have any
responsibility thereafter with respect to any such paying bank.
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ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account
(a) in accordance with the provisions of any
agreement among the Company, the Custodian and a broker-dealer
registered under the 1934 Act and a member of NASD (or any
futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of the
OCC and of any registered national securities exchange (or the
CFTC or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Company;
(b) for purposes of segregating cash or
Securities in connection with securities options purchased or
written by a Fund or in connection with financial futures
contracts (or options thereon) purchased or sold by a Fund;
(c) that constitute collateral for loans of
Securities made by a Fund;
(d) for purposes of compliance by the Company
with requirements under the 1940 Act for the maintenance of
segregated accounts by registered investment companies in
connection with reverse repurchase agreements and when-issued,
delayed delivery and firm commitment transactions; or
(e) for other proper corporate purposes, but
only upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, certified by an
Officer, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper
corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise
of due care in accordance with reasonable commercial standards in carrying out
its obligations under this Agreement, and shall be without liability to the
Company for any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability or claim unless such loss, damages, cost, expense,
liability or claim arises from negligence, bad faith or willful misconduct on
its part or on the part of any sub-custodian appointed pursuant to Section 3.3
above. The Custodian's cumulative liability within a calendar year shall be
limited with respect to the Company or any party claiming by, through or on
behalf of the Company for the initial and all subsequent renewal terms of this
Agreement, to the actual damages sustained by the Company, (actual damages for
uninvested funds shall be the overnight Fed funds rate). The Custodian shall be
entitled to rely on and may act upon written advice of counsel on all matters,
and shall be without liability for any action reasonably taken or omitted
pursuant to such advice. The Custodian shall promptly notify the Company of any
action taken or omitted by the Custodian pursuant to advice of counsel. The
Custodian shall not be under any obligation at any time to ascertain whether the
Company is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Company's Articles of Incorporation or by-laws, or its
investment objectives and policies as then in effect.
7.2 Actual Collection Required. So long as it has exercised due
care in accordance with reasonable commercial standards, the Custodian shall not
be liable for, or considered to be the custodian of, any cash belonging to the
Company or any money represented by a check, draft or other instrument for the
payment of money, until the Custodian or its agents actually receive such cash
or collect on such instrument.
54
7.3 No Responsibility for title, etc. So long as and to the extent
that it is in the exercise of due care in accordance with reasonable commercial
standards, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received or delivered
by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required
to enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Company if such Securities
are in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall
be entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Proper Instructions actually received by it.
7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply
necessary information to the entity or entities appointed by the Company to keep
the books of account of the Company and/or compute the value of the assets of
the Company. The Custodian shall take all such reasonable actions as the Company
may from time to time request to enable the Company to obtain, from year to
year, favorable opinions from the Company's independent accountants with respect
to the Custodian's activities hereunder in connection with (a) the preparation
of any report or filing by the Company required by the SEC; and (b) the
fulfillment by the Company of any other requirements of the SEC.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Company shall indemnify and hold harmless
the Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and
any nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including reasonable attorneys' fees and disbursements),
liability (including, without limitation, liability arising under the Securities
Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities
and/or banking laws) or claim arising directly or indirectly (a) from the fact
that Securities are registered in the name of any such nominee; (b) from any
action or inaction by the Custodian or such sub-custodian upon Proper
Instructions; or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such sub-custody agreement, provided
that neither the Custodian nor any such sub-custodian shall be indemnified and
held harmless from and against any such loss, damage, cost, expense, liability
or claim arising from the Custodian's or such sub-custodian's negligence, bad
faith or willful misconduct.
8.2 Indemnity to be Provided. If the Company requests the
Custodian to take any action with respect to Securities that may, in the opinion
of the Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Company shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Company shall be liable for any failure
or delay in performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes; fires; floods;
wars; civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances
55
beyond its reasonable control as may cause interruption, loss or malfunction of
utility, transportation, computer (hardware or software) or telephone
communication service; accidents; labor disputes, acts of civil or military
authority; governmental actions; or inability to obtain labor, material,
equipment or transportation; provided, however, that the Custodian in the event
of a failure or delay shall use its best efforts to ameliorate the effects of
any such failure or delay. Notwithstanding the foregoing, the Custodian shall
maintain sufficient disaster recovery procedures to minimize interruptions.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of
the date first set forth above and shall continue in full force and effect until
March 31, 2006 or terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement
by giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninty (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board, the Custodian shall, upon receipt of a notice of acceptance by the
successor custodian, on such specified date of termination (a) deliver directly
to the successor custodian all Securities (other than Securities held in a
Book-Entry System or Securities Depository) and cash then owned by the Company
and held by the Custodian as custodian; and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or for the benefit
of the Company at the successor custodian, provided that the Company shall have
paid to the Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Company may at any time immediately terminate this Agreement in
the event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Company on or before the date of termination
specified pursuant to Section 10.1 above, then the Custodian shall have the
right to deliver to a bank or trust company of its own selection that is (a) a
"Bank" as defined in the 1940 Act; (b) has aggregate capital, surplus and
undivided profits as shown on its then most recent published report of not less
than $25 million; and (c) is doing business in New York, New York, all
Securities, cash and other property held by Custodian under this Agreement and
to transfer to an account of or for the Company at such bank or trust company
all Securities of the Company held in a Book-Entry System or Securities
Depository. Upon such delivery and transfer, such bank or trust company shall be
the successor custodian under this Agreement and the Custodian shall be relieved
of all obligations under this Agreement. If, after reasonable inquiry, Custodian
cannot find a successor custodian as contemplated in this Section 10.3, then
Custodian shall have the right to deliver to the Company all Securities and cash
then owned by the Company and to transfer any Securities held in a Book-Entry
System or Securities Depository to an account of or for the Company. Thereafter,
the Company shall be deemed to be its own custodian with respect to the Company
and the Custodian shall be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Company and the Custodian. The fees and other charges in
effect on the date hereof and applicable to the Funds are set forth in Exhibits
C and D attached hereto.
56
ARTICLE XII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the receipt at the address set forth after its name herein
below:
To the Company:
Mercantile Funds, Inc.
Mercantile Mutual Funds Xxxxxxxxxxxxxx
Xxx Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the Custodian:
Fifth Third Bank
00 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Area Manager - Trust Operations
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIII
MISCELLANEOUS
13.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio without regards to
its conflicts of law provision.
13.2 References to Custodian. The Company shall not circulate any
printed matter that contains any reference to the Custodian without the prior
written approval of the Custodian, excepting printed matter contained in the
prospectus or statement of additional information or its registration statement
and such other printed matter as merely identifies the Custodian as custodian
for the Company. The Company shall submit printed matter requiring approval to
Custodian in draft form, allowing sufficient time for review by the Custodian
and its counsel prior to any deadline for printing.
13.3 No Waiver. No failure by either party hereto to exercise and
no delay by such party in exercising, any right hereunder shall operate as a
waiver thereof. The exercise by either party hereto of any right hereunder shall
not preclude the exercise of any other right, and the remedies provided herein
are cumulative and not exclusive of any remedies provided at law or in equity.
13.4 Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
13.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
57
13.6 Severability. If any provision of this Agreement shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby.
13.7 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this Agreement shall not be
assignable by either party hereto without the written consent of the other party
hereto.
13.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
MERCANTILE FUNDS, INC.
ATTEST:
/s/ Xxxxxxxx X. Xxxxxxx By: /s/Xxxx X. Xxxxxxx
------------------------------------- -----------------------------
Name: Xxxx X. Xxxxxxx
Title: President
FIFTH THIRD BANK
ATTEST:
/s/ Xxxxx Xxxxx By: /s/Xxxxxxxxx Xxxxx
------------------------------------- -----------------------------
Name: Xxxxxxxxx Xxxxx
Title: Trust Officer
58
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
MERCANTILE FUNDS, INC.
AND FIFTH THIRD BANK
April 1, 2003
NAME OF FUND
Mercantile Prime Money Market Fund
Mercantile Government Money Market Fund
Mercantile Tax-Exempt Money Market Fund
Mercantile Growth & Income Fund
Mercantile Equity Income Fund
Mercantile Equity Growth Fund Mercantile Capital
Opportunities Fund Mercantile International Equity Fund
Mercantile Diversified Real Estate Fund
Mercantile Limited Maturity Bond Fund
Mercantile Total Return Bond Fund
Mercantile Maryland Tax-Exempt Bond Fund
Mercantile Intermediate Tax-Exempt Bond Fund
Mercantile National Tax-Exempt Bond Fund
Mercantile Funds, Inc.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxx
Title: President
Fifth Third Bank
By: /s/ Xxxxxxxxx Xxxxx
-----------------------------
Name: Xxxxxxxxx Xxxxx
Title: Trust Officer
59
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
MERCANTILE FUNDS, INC.
AND FIFTH THIRD BANK
April 1, 2003
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Company to administer each Custody Account.
Name Signature
---- ---------
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
-------------------------------------- ----------------------------------------
60
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of Mercantile Funds, Inc. (the
"Company") and any of them, namely the President, Vice President, Secretary and
Treasurer, are hereby authorized as signers for the conduct of business for and
on behalf of the Funds with Fifth Third Bank (the "Custodian"):
Xxxx X. Xxxxxxx PRESIDENT /s/ Xxxx X. Xxxxxxx
-------------------
Xxxxxxxx X. XxXxxxx VICE PRESIDENT /s/ Xxxxxxxx X. XxXxxxx
-----------------------
Xxxxxx X. Xxxxxx TREASURER /s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxxxx X. Xxxxxxx SECRETARY /s/ Xxxxxxxx X. Xxxxxxx
-----------------------
The undersigned officer of Company hereby certifies that the foregoing
is within the parameters of a resolution adopted by the Board at a meeting held
on, or by a unanimous written consent dated, February 7, 2003, directing and
authorizing preparation of documents and to do everything necessary to effect
the Custody Agreement between the Company and the Custodian.
By: /s/ Xxxxxxxx X. Xxxxxxx
-----------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Secretary, Mercantile Funds, Inc.
61
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
MERCANTILE FUNDS, INC. AND FIFTH THIRD BANK
April 1, 2003
MUTUAL FUND DOMESTIC CUSTODY FEE SCHEDULE
BASIC ACCOUNT CHARGE *
0.98 of a basis point per annum on Fund's net assets.
TRANSACTION FEES**/ PAYDOWNS
No charge.
FED WIRE TRANSACTIONS
No charge.
EARNINGS CREDITS ON BALANCES/ INTEREST ON OVERDRAFTS
Earnings credits are provided to the Fund on 100% of the daily balance in the
domestic custodian account after reduction for Federal Reserve requirements,
computed at the 90-day T-xxxx rate on the day of the balance.
Overdrafts, excluding bank errors, will cause a reduction of earnings credits
daily, computed at 1% above the Federal Funds rate on the day of the overdraft.
Custody fees due the Bank are calculated monthly. If the earnings credits for
the Fund exceed the bank charges, such excess can be carried forward to the next
succeeding month. However, no earnings credits will be carried forward after
year-end. If a negative amount is computed after considering earnings credits
(positive/negative) and bank charges, such negative amounts would be billed
monthly.
BILLING CYCLE
The above fees are billed monthly.
*Please note that the above fees cover all systems development and technology
support. There are no hidden costs or additional charges associated with this
fee schedule.
**A transaction is a purchase, sale, maturity, redemption, tender, exchange,
dividend reinvestment, deposit or withdrawal of a security (with the exception
of Fifth Third Certificates of Deposit, Commercial Paper & Repos).
62
EXHIBIT D
TO THE CUSTODY AGREEMENT BETWEEN
MERCANTILE FUNDS, INC. AND FIFTH THIRD BANK
April 1, 2003
MUTUAL FUND INTERNATIONAL CUSTODY FEE SCHEDULE
BASIC ACCOUNT CHARGE
7 basis points per annum on Fund's net assets plus holdings, transactions and
out of pocket expenses.
TRANSACTION
-----------
Argentina 30.00
Australia 27.00
Xxxxxxx 00.00
Xxxxxxxxxx 120.00
Belgium 38.00
Botswana 21.25
Brazil 22.50
Canada 11.00
Xxxxx 00.00
Xxxxx 50.00
Columbia 75.00
Czech, Rep. 40.00
Denmark 44.00
Euroclear 9.00
Ecuador 50.00
Egypt 80.00
Estonia 9.00
Finland 33.00
France 40.00
Germany 24.00
Ghana 38.00
Greece 83.00
Hong Kong 26.00
Hungary 100.00
India 100.00
Indonesia 80.00
Ireland 24.00
Israel 18.00
Italy 45.00
Japan 5.00
Jordan 102.00
Kenya 38.00
Korea 14.00
Luxembourg 20.00
Malaysia 71.00
Mexico 15.00
Morocco 87.00
Namibia 38.00
Netherlands 10.00
New Zealand 34.00
Nigeria 38.00
Norway 39.00
Pakistan 90.00
Xxxx 00.00
Xxxxxxxxxxx 90.00
Poland 40.00
Portugal 66.00
Romania 100.00
Russia 45.00
Singapore 32.00
Xxxxxx Xxxxxxxx 00.00
Xxxxxxxx 100.00
South Africa 11.00
Spain 31.50
Sri Lanka 45.00
Swaziland 38.00
Xxxxxx 00.00
Xxxxxxxxxxx 25.00
Taiwan 95.00
Thailand 34.00
Turkey 45.00
U.K. 23.00
Uruguay 50.00
Venezuela 100.00
Zambia 38.00
Zimbabwe 38.00
63