CUSTODIAL SERVICES AGREEMENT
AGREEMENT dated as of the 30/th/ day of September, 2006, between Comerica
Bank, a Michigan banking corporation, ("Custodian"), and Monarch Funds, a
business trust organized under the laws of the Commonwealth of Massachusetts
("Customer" or "Trust").
WHEREAS, Customer is an open-end, management investment company registered
under the Investment Company Act of 1940, as amended ("1940 Act"), and may
offer one or more series of shares, each of which shall represent an interest
in a separate portfolio of Securities and Cash (each as hereinafter defined)
(all such existing and additional series now or hereafter listed on Exhibit A
being hereafter referred to individually as a "Fund," and collectively, as the
"Funds"); and
WHEREAS, Customer wishes to retain Custodian to provide certain custodial
services to Customer for the benefit of the Funds, and Custodian is willing to
provide such services;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. Customer, on behalf of each Fund, hereby employs
Custodian as custodian of all assets of each Fund that are delivered to and
accepted by Custodian (the "Property") pursuant to the terms and conditions set
forth herein. For purposes of this Agreement, "delivery" of Property shall
include the acquisition by Customer of a security entitlement (as that term is
defined in the New York Uniform Commercial Code ("UCC")). Without limitation,
such Property shall include stocks and other equity interests of every type,
evidences of indebtedness, other instruments representing same or rights or
obligations to receive, purchase, deliver or sell same and other non-cash
investment property of a Fund ("Securities") and cash from any source and in
any currency ("Cash"), provided that Custodian shall have the right, in its
sole discretion, to refuse to accept as Property any property of a Fund that
Custodian considers not to be appropriate or in proper form for deposit for any
reason. Custodian shall not be responsible for any property of a Fund held or
received by Customer or others and not delivered to Custodian.
2. Maintenance of Securities and Cash at Custodian Locations. Pursuant to
Instructions (as hereinafter defined in Section 15), Customer shall direct
Custodian to (a) settle Securities transactions and maintain Cash in the
country or other jurisdiction in which the principal trading market for such
Securities is located, where such Securities are to be presented for payment or
where such Securities are acquired and (b) maintain Cash and cash equivalents
in such countries in amounts reasonably necessary to effect Customer's
transactions in such Securities. Instructions to settle Securities transactions
in any country shall be deemed to authorize the holding of such Securities and
Cash in that country.
3. Custody Account. Except as provided in Section 4, Custodian agrees to
establish and maintain one or more custody accounts on its books each in the
name of Customer on behalf of
a Fund (each, an "Account") for any and all Property from time to time received
and accepted by Custodian for the account of such Fund. Upon delivery by
Customer to Custodian of any acceptable Property belonging to a Fund, Customer
shall, by Instructions, specifically indicate to which Fund such Property
belongs or if such Property belongs to more than one Fund, shall allocate such
Property to the appropriate Fund, and Custodian shall allocate such Property to
the Accounts in accordance with the Instructions. Customer, on behalf of each
Fund, acknowledges (i) its responsibility as a principal for all of its
obligations to Custodian arising under or in connection with this Agreement,
notwithstanding that it may be acting on behalf of other persons, and
(ii) warrants its authority to deposit in the appropriate Account any Property
received therefor by Custodian and to give, and authorize others to give,
instructions relative thereto. Custodian may deliver securities of the same
class in place of those deposited in the Account.
Custodian shall hold, keep safe and protect as custodian for each Account
all Property in such Account and, to the extent such Property constitutes
"financial assets" as defined in the UCC, shall maintain those financial assets
in such Account as security entitlements in favor of the Fund in whose name the
Account is maintained. All transactions involving the Property shall be
executed or settled solely in accordance with Instructions (which shall
specifically reference the Account for which such transaction is being
settled), except that until Custodian receives Instructions to the contrary,
Custodian will:
(a) collect all interest and dividends and all other income and payments,
whether paid in cash or in kind, on the Property, as the same become
payable and credit the same to the appropriate Account;
(b) present for payment all Securities held in an Account that are called,
redeemed or retired or otherwise become payable and all coupons and
other income items that call for payment upon presentation to the extent
that Custodian is actually aware of such opportunities and hold the cash
received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely ministerial
(including, without limitation, the exchange of temporary securities for
those in definitive form and the exchange of warrants, or other
documents of entitlement to securities, for the Securities themselves)
and (ii) when notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) or any proxies, notices,
reports or other communications pertaining to any of the Securities in
any Account is received for an Account, endeavor to provide notification
to Customer and to obtain Instructions, provided that if such
Instructions are not received in time for Custodian to take timely
action, no action shall be taken with respect thereto;
(d) whenever notification of a rights entitlement or a fractional interest
resulting from a rights issue, stock dividend or stock split is received
for an Account and such rights entitlement or fractional interest bears
an expiration date, if after endeavoring to obtain Instructions such
Instructions are not received in time for Custodian to take timely
action or if actual notice of such actions was received too late to seek
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Instructions, sell in the discretion of Custodian (which sale Customer
hereby authorizes Custodian to make) such rights entitlement or
fractional interest and credit the Account with the net proceeds of such
sale;
(e) execute in Customer's name for an Account, whenever Custodian deems it
appropriate, such ownership and other certificates as may be required to
obtain the payment of income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the nature of
taxes imposed on interest, dividends or other similar income on the
Property in such Account by any governmental authority. In the event
there is insufficient Cash available in such Account to pay such taxes
and levies, Custodian shall notify Customer of the amount of the
shortfall and Customer may, or may cause the Fund to, at its option,
deposit additional Cash in such Account or take steps to have sufficient
Cash available. Customer, on behalf of the Funds agrees, when and if
requested by Custodian and required in connection with the payment of
any such taxes, to cooperate with Custodian in furnishing information,
executing documents or otherwise;
(g) appoint brokers and agents for any of the ministerial transactions
involving the Securities described in (a)--(f), including, without
limitation, affiliates of Custodian or any Subcustodian;
(h) in the event of any loss of Securities or Cash, use its best efforts to
ascertain the circumstances relating to such loss and promptly report
the same to Customer; and
(i) invest accumulated cash in short-term funds as directed by Customer from
time to time in Instructions. The Custodian shall not be liable for
interest on any cash not so invested or held by it awaiting investment
or distribution instructions from Customer.
4. Subcustodians and Securities Systems. Customer authorizes and instructs
the Custodian to maintain the Property in each Account directly in one of its
United States ("U.S.") branches or indirectly through custody accounts that
have been established by the Custodian with the following other securities
intermediaries: another U.S. bank or trust company or branch thereof located in
the U.S. that is itself qualified under the 1940 Act, to act as custodian
(individually, a "Subcustodian"), or a U.S. securities depository or clearing
agency or book-entry system in which the Custodian or a Subcustodian
participates (each a "Securities System"), provided that in each case in which
a Subcustodian or Securities System is employed, each such Subcustodian or
Securities System shall have been approved by Instructions. Exhibit D attached
hereto incorporates by reference all Subcustodians and Securities Systems
approved by the parties as of the date hereof.
5. Use of Subcustodian. With respect to Property in an Account that is
maintained by Custodian through a Subcustodian employed pursuant to Section 4:
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(a) Custodian will identify on its books as belonging to Customer on
behalf of a Fund, any Property maintained through such Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be subject
only to the instructions of Custodian or its agents.
(c) Property deposited with a Subcustodian will be maintained in an
account holding only assets for customers of Custodian.
6. Use of Securities System. With respect to Property in the Account(s) that
is maintained by Custodian or any Subcustodian through a Securities System
employed pursuant to Section 4:
(a) Custodian shall, and the Subcustodian will be required by its
agreement with Custodian to, identify on its books such Property as
being maintained for the account of Custodian or Subcustodian for its
customers.
(b) Any Property maintained through a Securities System for the account of
Custodian or a Subcustodian will be subject only to the instructions
of Custodian or such Subcustodian, as the case may be.
(c) Property deposited with a Securities System will be maintained in an
account holding only assets for customers of Custodian or
Subcustodian, as the case may be, unless precluded by applicable law,
rule, or regulation.
(d) Custodian shall send Customer a confirmation of any transfers to or
from an Account. When securities are transferred to an Account, the
Custodian shall also, by book-entry or otherwise, identify as
belonging to a Portfolio a quantity of securities in a fungible bulk
of securities: (i) registered in the name of the Custodian or its
nominee, or (ii) shown on the Custodian's account on the books of a
Subcustodian, a Securities System, or the Custodian's agent.
(e) Custodian shall provide Customer with any report obtained by Custodian
on the Securities System's accounting system, internal accounting
control and procedures for safeguarding securities deposited in the
Securities System.
7. Agents. Custodian may at any time or times in its sole discretion appoint
(or remove) as its agent to carry out such of the provisions of this Agreement
as Custodian may from time to time direct any other U.S. bank or trust company
which is itself qualified under the 1940 Act to act as custodian, provided,
however, that the appointment of any agent shall not relieve Custodian of its
responsibilities or liabilities hereunder, and Custodian shall be liable
hereunder for the actions or inactions of the agent to the same extent as if
they were the actions or inactions of Custodian. Custodian shall provide
reasonable notice to Customer of the appointment or removal of any agent.
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8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property, whether maintained directly by
Custodian or indirectly through a Subcustodian or a Securities System
as authorized herein, shall be clearly recorded on Custodian's books
as belonging to the appropriate Account and not to the Custodian and
on the Subcustodian's or Securities System's books as belonging to the
Custodian and not to the Subcustodian or Securities System. Custodian
shall keep accurate and detailed accounts of all investments,
receipts, disbursements and other transactions for each Account. All
accounts, books and records of Custodian relating thereto shall be
open to inspection and audit at all reasonable times during normal
business hours by any person designated by Customer. All such accounts
shall be maintained and preserved in the form reasonably requested by
Customer. Custodian will supply to Customer from time to time, as
mutually agreed upon but not less frequently than monthly, a statement
in respect to any Property in an Account maintained by Custodian, by a
Subcustodian, or by a Securities System. In the absence of the filing
in writing with Custodian by Customer of exceptions or objections to
any such statement within sixty (60) days of the mailing thereof,
Customer shall be deemed to have approved such statement and in such
case or upon written approval of Customer of any such statement, such
statement shall be presumed to be for all purposes correct with
respect to all information set forth therein.
(b) Custodian shall take all reasonable action as Customer may request to
obtain from year to year favorable opinions from Customer's
independent certified public accountants with respect to Custodian's
activities hereunder in connection with the preparation of Customer's
registration statement on Form N-1A and Customer's Form N-SAR or other
periodic reports to the SEC and with respect to any other requirements
of the SEC.
(c) At the request of Customer, Custodian shall deliver, and shall cause
the Subcustodians to deliver, to Customer a written report prepared by
Custodian's independent certified public accountants with respect to
the services provided by Custodian under this Agreement, including,
without limitation, Custodian's accounting system, internal accounting
control and procedures for safeguarding Cash and Securities, including
Cash and Securities deposited and/or maintained with a Subcustodian or
in a Securities System. Such report shall be of sufficient scope and
in sufficient detail as may reasonably be required by Customer and as
may reasonably be obtained by Custodian.
(d) Customer may elect to participate in any of the electronic on-line
service and communications systems offered by Custodian, a
Subcustodian or a Securities System that can provide Customer, on a
daily basis, with the ability to view on-line
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or to print in hard copy various reports of Account activity and of
Securities and/or Cash being held in any Account. To the extent that
such service shall include market values of Securities in an Account,
Customer hereby acknowledges that Custodian or such Subcustodian now
obtains and may in the future obtain information on such values from
outside sources that Custodian or such Subcustodian considers to be
reliable, and Customer agrees that Custodian and such Subcustodian
(i) does not verify or represent or warrant either the reliability of
such service nor the accuracy or completeness of any such information
furnished or obtained by or through such service and (ii) shall be
subject to compliance with the standard of care set forth in Section 15
of this Agreement in selecting and utilizing such service or furnishing
any information derived therefrom.
9. Holding of Securities, Nominees, etc. Securities in an Account that are
maintained by Custodian or any Subcustodian may be held directly by such entity
in the name of Customer or in bearer form or maintained, on behalf of a Fund,
in Custodian's or Subcustodian's name or in the name of Custodian's or
Subcustodian's nominee. Securities that are maintained through a Subcustodian
or which are eligible for deposit in a Securities System as provided above may
be maintained with the Subcustodian or the Securities System in an account for
Custodian's or Subcustodian's customers, unless prohibited by law, rule, or
regulation. Custodian or Subcustodian, as the case may be, may combine
certificates representing Securities held in an Account with certificates of
the same issue held by Custodian or Subcustodian as fiduciary or as a
custodian. In the event that any Securities in the name of Custodian or its
nominee or held by a Subcustodian and registered in the name of such
Subcustodian or its nominee are called for partial redemption by the issuer of
such Security, Custodian may, subject to the rules or regulations pertaining to
allocation of any Securities System in which such Securities have been
deposited, allot, or cause to be allotted, the called portion of the respective
beneficial holders of such class of security in any manner Custodian deems to
be fair and equitable. Securities maintained with a Securities System shall be
maintained subject to the rules of that Securities System governing the rights
and obligations among the Securities System and its participants.
10. Proxies, etc. With respect to any proxies, notices, reports or other
communications pertaining to any of the Securities in any Account, Custodian
shall perform such services and only such services as are (i) set forth in
Section 3 of this Agreement, and (ii) as may otherwise be agreed upon between
Custodian and Customer. Neither Custodian nor its nominees or agents shall vote
upon or in respect of any of the Securities in an Account, execute any form of
proxy to vote thereon, or give any consent or take any action (except as
provided in Section 3) with respect thereto except upon the receipt of
Instructions.
11. Settlement Procedures. Securities will be transferred, exchanged or
delivered by Custodian, a Subcustodian or a Securities System upon receipt by
Custodian of Instructions that include all information required by Custodian.
Settlement and payment for Securities received for an Account and delivery of
Securities out of such Account may be effected in accordance with the customary
or established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering Securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer)
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against a receipt with the expectation of receiving later payment for such
Securities from such purchaser or dealer, as such practices and procedures may
be modified or supplemented in accordance with the standard operating
procedures of Custodian in effect from time to time for that jurisdiction or
market and subject to compliance by Custodian with the standard of care set
forth in Section 15 of the Agreement. Custodian shall not be liable for any
loss which results from effecting transactions in accordance with the customary
or established securities trading or securities processing practices and
procedures in the applicable jurisdiction or market.
Notwithstanding that the Custodian may settle purchases and sales against,
or credit income to, an Account, on a contractual basis, the Custodian may, at
its sole option, reverse such credits or debits to the appropriate Account in
the event that the transaction does not settle, or the income is not received
in a timely manner, and Customer agrees to hold the Custodian harmless from any
losses that may result therefrom without fault on the part of Custodian.
12. Conditional Credits.
(a) Notwithstanding any other provision of this Agreement, Custodian or a
Subcustodian shall not be required to comply with any Instructions to
settle the purchase of any securities for the Account unless there are
sufficient immediately available funds in the Account, provided that,
if, after all expenses, debits and withdrawals of Cash ("Debits")
applicable to the Account have been made and if after all Conditional
Credits, as defined below, applicable to the Account have become final
entries as set forth in (c) below, the amount of immediately available
funds in such Account is at least equal to the aggregate purchase
price of all securities for which Custodian has received Instructions
to settle on that date ("Settlement Date"), Custodian, upon
settlement, shall credit the Securities to the Account by making a
final entry on its books and records.
(b) Notwithstanding the foregoing, if after all Debits applicable to the
Account have been made, the amount of immediately available cash in
such Account is less than the aggregate purchase price of all
securities for which the Custodian has received Instructions to settle
on any Settlement Date, the Custodian, upon settlement, shall credit
the securities to the Account by making a conditional entry on its
books and records ("Conditional Credit"), pending receipt of
sufficient immediately cash in the relevant currency in the Account.
Custodian shall not be required to make such credit if the credit
would be greater than 33 1/3% of the Account's assets or $100 million,
whichever is less.
(c) If, within a reasonable time, as determined in the sole discretion of
Custodian from the posting of a Conditional Credit and after all
Debits applicable to the Account have been made, immediately available
cash at least equal to the aggregate purchase price in such currency
of all securities subject to a Conditional Credit on a Settlement Date
is deposited into the Account, the Custodian shall make the
Conditional Credit a final entry on its books and records. In such
case, Customer shall be liable to the Custodian only for charges at a
rate that the Custodian
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customarily charges for similar extensions of credit. These charges
are listed in Exhibit B.
(d) If (i) within a reasonable time, as determined in the sole discretion
of Custodian, from the posting of a Conditional Credit, immediately
available cash at least equal to the resultant Debit on a Settlement
Date is not deposited in the Account, or (ii) any Proceeding (as
defined below) shall occur, the Custodian may sell such of the
securities subject to the Conditional Credit as it selects in its sole
discretion and shall apply the net proceeds of such sale to cover such
Debit, including related late charges, and any remaining proceeds
shall be credited to the Account. If such proceeds are insufficient to
satisfy such Debit in full, Customer shall continue to be liable to
the Custodian for any shortfall. The Custodian shall make the
Conditional Credit a final entry on its books as to the securities not
required to be sold to satisfy such Debit. Pending payment in full by
Customer of the purchase price for securities subject to a Conditional
Credit, and the Custodian's making a Conditional Credit a final entry
on its books, and, unless consented to by the Custodian, Customer
shall have no right to give further Instructions in respect of
securities subject to a Conditional Credit. The Custodian shall have
the sole discretion to determine which securities shall be deemed to
have been paid for by Customer out of cash available in the Account.
Any such Conditional Credit may be reversed (and any corresponding
Debit shall be canceled) by the Custodian unless and until the
Custodian makes a final entry on its books crediting such securities
to the Account. The term "Proceeding" shall mean any insolvency,
bankruptcy, receivership, reorganization or similar proceeding
relating to Customer, the Trust or a Fund whether voluntary or
involuntary.
(e) Under normal circumstances, Customer will not facilitate the purchase
of securities without believing there to be sufficient cash in the
Account (which cash shall not include the expected proceeds of the
sale of the purchased securities). On occasion, Customer may borrow
money from the Custodian or overdraft an Account to facilitate
redemptions, in an amount of up to 33 1/3% of the Account's assets or
$100 million, whichever is less. The Custodian's charges for borrowing
money from the Custodian and overdrafting an account are listed in
Exhibit B.
13. Permitted Transactions. Customer agrees that it will cause transactions
to be made pursuant to this Agreement only upon Instructions in accordance with
Section 14 and only for the purposes listed below or any other purpose
specified or implied by Section 3.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise become
payable.
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(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed or in order
to satisfy requirements for additional or substitute collateral.
(h) In connection with any loans, but only against receipt of collateral
as specified in Instructions which shall reflect any restrictions
applicable to Customer.
(i) For the purpose of redeeming shares of the capital stock of Customer
against delivery of the shares to be redeemed to Custodian, a
Subcustodian or Customer's transfer agent.
(j) For the purpose of redeeming in kind shares of Customer against
delivery of the shares to be redeemed to Custodian, a Subcustodian or
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement among
Customer, on behalf of a Fund, the Fund's investment adviser and a
broker-dealer relating to compliance with the rules of The Options
Clearing Corporation, the Commodities Futures Trading Commission or of
any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by a Fund.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released
only upon payment to Custodian of monies for the premium due and a
receipt for the Securities which are to be held in escrow. Upon
exercise of the option, or at expiration, Custodian will receive the
Securities previously deposited from broker. Custodian will act
strictly in accordance with Instructions in the delivery of Securities
to be held in escrow and will have no responsibility or liability for
any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) Upon the termination of this Agreement as set forth in Section 19.
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Customer agrees that Custodian shall have no obligation to verify the
purpose for which a transaction is being effected.
14. Instructions. The term "Instructions" means instructions from Customer
in respect of any of Custodian's duties hereunder that have been received by
Custodian (i) in writing (including, without limitation, facsimile
transmission) or by tested telex signed or given by such one or more person or
persons as Customer shall have from time to time authorized in writing to give
the particular class of Instructions in question and whose name and (if
applicable) signature and office address have been filed with Custodian; or
(ii) which have been transmitted electronically through an electronic on-line
service and communications system offered by Custodian or other electronic
instruction system acceptable to Custodian; or (iii) a telephonic or oral
communication by one or more persons as Customer shall have from time to time
authorized to give the particular class of Instructions in question and whose
name has been filed with Custodian; or (iv) upon receipt of such other form of
instructions as Customer may from time to time authorize in writing and which
Custodian has agreed in writing to accept. Instructions in the form of oral
communications shall be confirmed by Customer by tested telex or writing in the
manner set forth in clause (i) above, but the lack of such confirmation shall
in no way affect any action taken by Custodian in reliance upon such oral
instructions prior to Custodian 's receipt of such confirmation. Instructions
may relate to specific transactions or to types or classes of transactions, and
may be in the form of standing instructions.
Custodian shall have the right to assume in the absence of notice to the
contrary from Customer that any person whose name is on file with Custodian
pursuant to this Section has been authorized by Customer to give the
Instructions in question and that such authorization has not been revoked.
Custodian may act upon and conclusively rely on, without any liability to
Customer or any other person or entity for any losses resulting therefrom, any
Instructions reasonably believed by it to be furnished by the proper person or
persons as provided above.
15. Standard of Care. So long as and to the extent that it is in the
exercise of reasonable care, Custodian shall not be responsible for the title,
validity or genuineness of any Property or evidence of title thereto received
by it or delivered by it pursuant to this Agreement and shall be held harmless
in acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party or
parties.
Custodian shall be under no duty to take any action except as specifically
set forth herein or as may be specifically agreed to by Custodian in writing.
Custodian shall use its best judgment and efforts in rendering the services
described in this Agreement. Custodian shall not be liable to Customer for any
action or inaction of Custodian relating to any event whatsoever in the absence
of bad faith, willful misfeasance or negligence in the performance of
Custodian's duties or obligations under this Agreement or Custodian's reckless
disregard of its duties and obligations under this Agreement.
Customer agrees to indemnify and hold harmless Custodian, its employees,
agents, directors, officers and managers and any person who controls the
Custodian within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "1933 Act"), or Section 20 of the
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Securities Exchange Act of 1934, as amended (the "1934 Act") ("Custodian
Indemnitees"), against and from any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel
fees and other expenses of every nature and character arising out of or in any
way related to Custodian's actions taken or failures to act under this
Agreement that are consistent with the standard of care set forth in Section 15
of this Agreement, or Customer's instructions, provided those instructions are
followed accurately, or any breach of Customer's representations set forth in
Section 23 of this Agreement (a "Custodian Claim"). Customer shall not be
required to indemnify any Bank Indemnitee if, prior to confessing any Custodian
Claim against the Custodian Indemnitee, Custodian or the Custodian Indemnitee
does not give Customer written notice of and reasonable opportunity to defend
against the Custodian Claim in its own name or in the name of the Custodian
Indemnitee.
Custodian agrees to indemnify and hold harmless Customer, its employees,
agents, directors, officers and managers and any person who controls Customer
within the meaning of Section 15 of the 1933 Act or section 23 of the 1934 Act
("Customer Indemnitees"), against and from any and all claims, demands,
actions, suits, judgments, liabilities, losses, damages, costs, charges,
reasonable counsel fees and other expenses of every nature and character
arising out of or in any way related to Custodian's actions taken or failures
to act under this Agreement that are not consistent with the standard of care
set forth in Section 15 of this Agreement or any breach of Custodian's
representations set forth in Section 23 of this Agreement (a "Customer Claim").
Custodian shall not be required to indemnify any Company Indemnitee if, prior
to confessing any Customer Claim against the Customer Indemnitee, Customer or
the Customer Indemnitee does not give Custodian written notice of and
reasonable opportunity to defend against the Customer Claim in its own name or
in the name of the Customer Indemnitee.
If Customer requires Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of Custodian, result in Custodian or its nominee assigned to the
Trust or a Fund being liable for the payment of money or incurring liability of
some other form, Customer as a prerequisite to requiring Custodian to take such
action, shall provide indemnity to Custodian in an amount and form satisfactory
to it.
If Customer requires Custodian to advance cash or securities for any purpose
for the benefit of a Fund or in the event that Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Agreement, except such
as may arise from its or its nominees own negligent action, negligent failure
to act or willful misconduct, Custodian promptly shall notify Customer of the
existence of any such advances, their amount and the Fund to which the advance
applies. Customer shall on behalf of the Fund repay Custodian on demand and in
full such advances in the amounts as presented by Custodian as correct amounts,
on the first business day following Customer's receipt of notice of such demand.
16. Investment Limitations and Legal or Contractual Restrictions or
Regulations. Neither Custodian nor any Subcustodians shall be liable to
Customer or a Fund, and Customer agrees to indemnify Custodian, all
Subcustodians and their nominees, for any loss, damage or expense suffered or
incurred by Custodian, any Subcustodian or their nominees arising out of any
- 11 -
violation of any investment restriction or other restriction or limitation
applicable to Customer or any Fund pursuant to any contract or any law or
regulation, unless the violation is the result of the Custodian's or the
Subcustodian's failure to comply with the standard set forth in Section 15 of
this Agreement.
17. Fees and Expenses. Customer agrees to pay to Custodian such compensation
for its services pursuant to this Agreement as may be mutually agreed upon in
writing from time to time. The initial fee schedule is attached hereto as
Exhibit B. Such fees will not be abated by, nor shall Custodian be required to
account for, any profits or commissions received by Custodian in connection
with its provision of custody services under this agreement. Customer hereby
agrees to hold Custodian harmless from any liability or loss resulting from any
taxes or other governmental charges, and any expense related thereto, which may
be imposed, or assessed with respect to any Property in an Account and also
agrees to hold Custodian, its Subcustodians, and their respective nominees
harmless from any liability as a record holder of Property in such Account.
Custodian is authorized to charge the applicable Account for such items, and
Custodian shall have a lien on the Property in the applicable Account for any
amount payable to Custodian under this Agreement by the Fund for which such
Account was established, including but not limited to amounts payable pursuant
to Section 12 and pursuant to indemnities granted by Customer under this
Agreement.
18. Amendment, Modifications, etc. No provision of this Agreement may be
amended, modified or waived except in a writing signed by the parties hereto
(except that Exhibit D may be amended as provided in Section 4 hereof by
Instructions approving a Subcustodian and Exhibit B may be amended as provided
for therein). No waiver of any provision hereto shall be deemed a continuing
waiver unless it is so designated. No failure or delay on the part of either
party in exercising any power or right under this Agreement operates as a
waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right.
19. Termination.
(a) This Agreement may be terminated by Customer or Custodian by ninety
(90) days' written notice to the other; provided that notice by
Customer shall specify the names of the persons to whom Custodian
shall deliver the Securities in each Account and to whom the Cash in
such Account shall be paid. If notice of termination is given by
Custodian, Customer shall, within ninety (90) days following the
giving of such notice, deliver to Custodian a written notice
specifying the names of the persons to whom Custodian shall deliver
the Securities in each Account and to whom the Cash in such Account
shall be paid. In either case, Custodian will deliver such Property to
the persons so specified, after deducting therefrom any amounts that
Custodian determines to be owed to it hereunder. In addition,
Custodian may in its discretion withhold from such delivery such
Property as may be necessary to settle transactions pending at the
time of such delivery. Customer grants to Custodian a lien and right
of setoff against the Account and all Property held therein from time
to time in the full amount of the foregoing obligations. If within
ninety (90) days following the giving of a notice of termination by
Custodian, Custodian does not receive the
- 12 -
aforementioned written notice specifying the names of the persons to
whom Custodian shall deliver the Securities in each Account and to
whom the Cash in such Account shall be paid, Custodian, at its
election, may deliver such Securities and pay such Cash to a bank or
trust company doing business in the State of New York to be held and
disposed of pursuant to the provisions of this Agreement, or may
continue to hold such Securities and Cash until a written notice as
aforesaid is delivered to Custodian, provided that from and after the
ninetieth day Custodian's obligations shall be limited to safekeeping.
(b) This Agreement may be terminated by Customer or Custodian as to one or
more Funds (but less than all of the Funds) by delivery of an amended
Exhibit A deleting such Funds, in which case termination as to such
deleted Funds shall take effect ninety (90) days after the date of
such delivery, or such earlier time as mutually agreed. The execution
and delivery of an amended Exhibit A that deletes one or more Funds
shall constitute a termination of this Agreement only with respect to
such deleted Fund(s), shall be governed by Section 19(a) as to the
identification of a successor custodian and the delivery of Cash and
Securities of the Fund(s) so deleted to such successor custodian, and
shall not affect the obligations of Custodian and Customer hereunder
with respect to the other Funds set forth in Exhibit A, as amended
from time to time.
(c) Sections 15, 16, 17, 24, 25 and 27 shall survive the termination of
this Agreement as to one or more or all Funds.
20. Notices. Except as otherwise provided in this Agreement, all requests,
demands or other communications between the parties or notices in connection
herewith (a) shall be in writing, hand delivered or sent by registered mail,
telex or facsimile addressed to such other address as shall have been furnished
by the receiving party pursuant to the provisions hereof and (b) shall be
deemed effective when received, or, in the case of a telex, when sent to the
proper number and acknowledged by a proper answer back. The Custodian will have
no responsibility for notification and processing of actions affecting
securities except for services required of the Custodian under Section 3 or
Section 13 of this Agreement.
21. Several Obligations of the Funds. With respect to any obligations of
Customer on behalf of each Fund and each of its related Accounts arising out of
this Agreement, Custodian shall look for payment or satisfaction of any
obligation solely to the assets and property of the Fund and such Accounts to
which such obligation relates as though Customer had separately contracted with
Custodian by separate written instrument with respect to each Fund and its
related Accounts.
22. Security for Payment. To secure payment of all obligations due
hereunder, Customer hereby grants to Custodian a continuing security interest
in and right of setoff against each Account and all Property held therein from
time to time in the full amount of such obligations; provided that, if there is
more than one Account and the obligations secured pursuant to this Section can
be allocated to a specific Account or the Fund related to such Account, such
security interest and right of setoff will be limited to Property held for that
Account only and its related Fund.
- 13 -
Should Customer fail to pay promptly any amounts owed hereunder, Custodian
shall be entitled to use available Property of the applicable Fund, and to
dispose of Securities in the applicable Fund as is necessary. In any such case
and without limiting the foregoing, Custodian shall be entitled to take such
other actions or exercise such other options, powers and rights as Custodian
now or hereafter has as a secured creditor under the UCC or any other
applicable law, including, without limitation, granting to any Subcustodian a
security interest in such Funds on terms similar to those set forth in this
Section 22.
23. Representations and Warranties.
(a) Customer hereby represents and warrants to Custodian that:
(i) the employment of Custodian and the allocation of fees, expenses and
other charges to any Account as herein provided, is not prohibited by
law or any governing documents or contracts to which it is subject;
(ii)the terms of this Agreement do not violate any obligation by which
Customer is bound, whether arising by contract, operation of law or
otherwise;
(iii)this Agreement has been duly authorized by appropriate action and when
executed and delivered will be binding upon Customer and each Fund in
accordance with its terms; and
(iv)it will deliver to Custodian a duly executed Secretary's Certificate
in the form of Exhibit C hereto or such other evidence of such
authorization as Custodian may reasonably require, whether by way of a
certified resolution or otherwise.
(b) Custodian hereby represents and warrants to Customer that:
(i) the terms of this Agreement do not violate any obligation by which
Custodian is bound, whether arising by contract, operation of law or
otherwise;
(ii)this Agreement has been duly authorized by appropriate action and when
executed and delivered will be binding upon Custodian in accordance
with its terms;
(iii)it will deliver to Customer such evidence of such authorization as
Customer may reasonably require, whether by way of a certified
resolution or otherwise; and
- 14 -
(iv)it is qualified as a custodian under Section 26(a) of the 1940 Act and
that it will remain so qualified or upon ceasing to be so qualified
shall promptly notify Customer in writing.
24. Limitations of Liability of the Trustees and Shareholders, Officers,
Employees and Agent. A copy of the Trust Instrument of the Trust is on file
with the Secretary of the Trust. The parties agree that neither the
Shareholders, Trustees, officers, employees nor any agent of the Trust shall be
liable hereunder and that the parties to this Agreement other than the Trust
shall look solely to the Trust property for the performance of this Agreement
or payment of any claim under this Agreement.
25. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of Michigan and shall not be assignable by
either party, but shall bind the successors in interest of Customer and
Custodian.
26. Representative Capacity and Binding Obligation. A copy of Customer's
Trust Instrument is on file with the Secretary of State of the Commonwealth of
Massachusetts. Notice is hereby given that this Agreement is not executed on
behalf of the Trustees of Customer as individuals, and the obligations of this
Agreement are not binding upon any of the Trustees, officers or shareholders of
Customer individually but are binding only upon the assets and property of the
Funds.
Custodian agrees that no shareholder, Trustee or officer of Customer may be
held personally liable or responsible for any obligations of Customer arising
out of this Agreement.
27. 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 rendering 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 or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, or any
Subcustodian, any auditor of the parties hereto, by judicial or administrative
process or otherwise by applicable law or regulation.
28. Severability. If any provision of this Agreement is determined to be
invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
29. Entire Agreement. This Agreement together with its Exhibits, contains
the entire agreement between the parties relating to the subject matter hereof
and supersedes any oral statements and prior writings with respect thereto.
- 15 -
30. Headings. The headings of the sections hereof are included for
convenience of reference only and do not form a part of this Agreement.
31. 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 each of the parties hereto.
IN WITNESS WHEREOF, each of the parties has caused it's duly authorized
signatories to execute this Agreement as of the date first written above.
COMERICA BANK
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
MONARCH FUNDS
By: /s/ Xxxx Xxxxxx
-----------------------------
Name: Xxxx Xxxxxx
Title: Principal Financial Officer
- 16 -
CUSTODIAL SERVICES AGREEMENT
EXHIBIT A
LIST OF FUNDS
Name of Fund Custodian Account Number
------------ ------------------------
Daily Assets Treasury Fund 1085004346
Daily Assets Government Fund 1085004355
Daily Assets Government Obligations Fund 1085004373
Daily Assets Cash Fund 1085004364
Date: 9/30/06
A-1
CUSTODIAL SERVICES AGREEMENT
EXHIBIT B
FEE SCHEDULE
Fund Fee as a % of
Annual Average Daily Net Assets
Total of all Funds 0.01%
Payable monthly in arrears as of the tenth (10/th/) day of the next month.
Charges for:
1. extensions of credit referenced in Section 12(c) of this Agreement;
2. borrowing money referenced in Section 12(e) of this Agreement; and
3. overdrafting an account as referenced in Section 12(e) of this Agreement
shall be equal to the Federal Funds Rate.
No provision of this Exhibit B may be amended, modified or waived except in
writing signed by Custodian and the Customer.
Date: 9/30/06
B-1
CUSTODIAL SERVICES AGREEMENT
EXHIBIT C
FORM OF SECRETARY'S CERTIFICATE
I, Xxxxx X. Xxxxxxxx, hereby certify that I am the Secretary of Monarch
Funds, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Trust"), and as such I am duly authorized to, and do
hereby, certify that:
1. Organizational Documents. The Trust's organizational documents, and all
amendments thereto, have been filed with the appropriate governmental officials
of Massachusetts, the Trust continues to be in existence and is in good
standing, and no action has been taken to repeal such organizational documents,
the same being in full force and effect on the date hereof.
2. Bylaws. The Trust's Bylaws have been duly adopted and no action has been
taken to repeal such Bylaws, the same being in full force and effect.
3. Resolutions. Resolutions have been duly adopted on behalf of the Trust,
which resolutions (i) have not in any way been revoked or rescinded, (ii) have
been in full force and effect since their adoption, to and including the date
hereof, and are now in full force and effect, and (iii) are the only
proceedings of the Trust now in force relating to or affecting the matters
referred to therein, including, without limitation, confirming that the Trust
is duly authorized to enter into a certain custody agreement with Customer
Trust, LLC (the "Agreement"), and that certain designated officers, including
those identified in paragraph 4 of this Certificate, are authorized to execute
said Agreement on behalf of the Trust, in conformity with the requirements of
the Trust's organizational documents, Bylaws, and other pertinent documents to
which the Trust may be bound.
4. Incumbency. The following named individuals are duly elected (or
appointed), qualified, and acting officers of the Trust holding those offices
set forth opposite their respective names as of the date hereof, each having
full authority, acting individually, to bind the Trust, as a legal matter, with
respect to all matters pertaining to the Agreement, and to execute and deliver
said Agreement on behalf of the Trust, and the signatures set forth opposite
the respective names and titles of said officers are their true, authentic
signatures:
Name Title Signature
---- ----- ---------
Xxxxxxx Xxxxxxx President ______________________
Xxxx X. Xxxxxx Vice President ______________________
Xxxx Xxxxxx Treasurer ______________________
C-1
IN WITNESS WHEREOF, I have hereunto set my hand this day of ,
2006.
Monarch Funds
By:
-----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Secretary
C-2
CUSTODIAL SERVICES AGREEMENT
EXHIBIT D
APPROVED SUBCUSTODIANS AND SECURITIES SYSTEMS
Comerica Bank's SubCustodians
Depository Trust Clearing Corporation
Comerica Bank's DTCC Number: 2108
Comerica Bank's Agent Bank Number 19143
Federal Reserve Bank of Detroit
Comerica Bank's ABA # 000000000
Comerica Bank's Trust Account Number Comerica Xxx/0000
Xxxxx Xxxxxx Xxxx - Xxx Xxxx Correspondent
Comerica Bank's Account Number for physical securities not eligible for DTCC
or FED:
Account # B6X1
RBC Dexia Investor Services - Global Custodian
Sunguard - XxxXXXX XX
Comerica Bank's Securities System
D-1
