CUSTODIAL SERVICES AGREEMENT
AGREEMENT dated as of the 6th day of June 2003, between Forum Trust, LLC
("Custodian"), a limited liability company organized under the laws of the State
of Maine doing business as a nondepository trust company, 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, Custodian has entered into a certain Subcustodian Agreement with
Comerica Bank ("Comerica") dated as of the 8th day of April 2002 and amended the
6th day of June 2003 (the "Subcustodian Agreement") under which Comerica
provides certain sub-custody services on behalf of the Funds to Custodian; 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 or any Subcustodian (as that term is defined in
Section 4) (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 or any Subcustodian.
2. MAINTENANCE OF SECURITIES AND CASH AT CUSTODIAN AND SUBCUSTODIAN
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 the last paragraph of 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 or any
Subcustodian 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 in 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 or a
Subcustodian 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, including, but not limited to, foreign
exchange 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 or Subcustodian 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) is received for an
Account, endeavor to receive 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;
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(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 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; and
(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.
4. SUBCUSTODIANS AND SECURITIES SYSTEMS. Customer authorizes and instructs
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 Custodian with the following other securities intermediaries: (a)
another U.S. bank or trust company (including Comerica pursuant to the
Subcustodian Agreement) or branch thereof located in the U.S. that is itself
qualified under the 1940 Act, to act as custodian or a non-U.S. branch of
Custodian or of any U.S. Subcustodian, or a U.S. securities depository or
clearing agency or system in which Custodian or a U.S. Subcustodian participates
(individually, a "U.S. Securities System") or (b) one of Custodian's
majority-owned non-U.S. subsidiaries, a majority-owned subsidiary of a U.S.
Subcustodian or a non-U.S. bank or trust company, acting as custodian
(individually, a "non-U.S. Subcustodian"; U.S. Subcustodians and non-U.S.
Subcustodians, collectively, "Subcustodians"), or a non-U.S. depository or
clearing agency or system in which Custodian or any Subcustodian participates
(individually, a "non-U.S. Securities System"; U.S. Securities System and
non-U.S.
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Securities System, collectively, "Securities System"), PROVIDED that in each
case in which a U.S. Subcustodian or U.S. Securities System is employed,
Custodian shall notify Customer of the appointment of such U.S. Subcustodian or
U.S. Securities System; PROVIDED FURTHER that in each case in which a non-U.S.
Subcustodian or non-U.S. Securities System is employed, (a) such Subcustodian or
Securities System either is (i) a "qualified U.S. bank" or (ii) an "eligible
foreign custodian" as defined by Rules 17f-5 and 17f-7, as amended, under the
1940 Act or such Subcustodian or Securities System is the subject of an order
granted by the U.S. Securities and Exchange Commission ("SEC") exempting such
agent or the subcustody arrangements thereto from all or part of the provisions
of Rule 17f-5 and 17f-7, as amended, and (b) the identity of the non-U.S.
Subcustodian and the agreement between Custodian and such non-U.S. Subcustodian
has been approved by Instructions; it being understood that Custodian shall have
no liability or responsibility for determining whether the approval of any
Subcustodian or Securities System by Instructions is proper under the 1940 Act
or any rule or regulation thereunder. Exhibit D attached hereto lists all
Subcustodians and Securities Systems that have been approved by Instructions.
Notwithstanding Section 20 hereof or any other provision hereof to the contrary,
Exhibit D may be amended solely by the delivery to Custodian of Instructions
pursuant to Section 15 hereof.
Upon receipt of Instructions from Customer, Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to Customer,
and if desirable and practicable, appoint a replacement Subcustodian or
Securities System in accordance with the provisions of this Section. In
addition, Custodian may, at any time in its discretion, upon written
notification to Customer, terminate the employment of any Subcustodian or
Securities System.
Custodian shall deliver to Customer annually a certificate stating: (a) the
identity of each non-U.S. Subcustodian and non-U.S. Securities System then
acting on behalf of Custodian and the name and address of the governmental
agency or other regulatory authority that supervises or regulates such non-U.S
Subcustodian and non-U.S. Securities System; (b) the countries in which each
non-U.S. Subcustodian or non-U.S. Securities System is located; and (c) if
requested by Customer's Board of Trustees or if the Board of Trustees directly
approves its foreign custody arrangements, such other information relating to
such non-U.S. Subcustodians and non-U.S. Securities Systems as may reasonably be
requested by Customer to ensure compliance with Rule 17f-5 and 17f-7, as
amended. If requested by the Customer's Board of Trustees or the Board of
Trustees responsible for any Fund directly approves its foreign custody
arrangements, Custodian also shall furnish annually to Custodian information
concerning such non-U.S. Subcustodians and non-U.S. Securities Systems similar
in kind and scope as that furnished to Customer in connection with the initial
approval of this Agreement. Custodian agrees to promptly notify Customer if, in
the normal course of its custodial activities, Custodian learns of a material
adverse change in the financial condition of a non-U.S. Subcustodian or a
non-U.S. Securities System suffers a material loss of Property, or Custodian has
reason to believe that any non-U.S. Subcustodian or non-U.S. Securities System
has ceased to be a qualified U.S. bank or an eligible foreign custodian each
within the meaning of Rule 17f-5 and 17f-7, as amended, or has ceased to be
subject to an exemptive order from the SEC.
Notwithstanding any other provision hereof to the contrary, (i) all
Property shall be delivered (as contemplated by Section 1) by or on behalf of
Customer only to Comerica or another
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Subcustodian, and (ii) all Instructions and other directions (as contemplated by
Section 2) shall be delivered by Customer only to Comerica or another
Subcustodian. All provisions of this Agreement (including, without limitation,
the final paragraph of Section 3) shall be interpreted to give effect to the
preceding sentence and Forum shall have authority to enter the Subcustodian
Agreement as agent of Customer.
5. USE OF SUBCUSTODIAN. With respect to Property in an Account that is
maintained by Custodian through a Subcustodian employed pursuant to Section 4:
(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.
(d) Any agreement Custodian shall enter into with a non-U.S. Subcustodian
with respect to maintaining Property shall require that (i) the
Account will be adequately indemnified or its losses adequately
insured; (ii) the Property so maintained is not subject to any right,
charge, security interest, lien or claim of any kind in favor of such
Subcustodian or its creditors except a claim for payment in accordance
with such agreement for its safe custody or administration; (iii)
beneficial ownership of Securities be freely transferable without the
payment of money or value other than for safe custody or
administration; (iv) adequate records will be maintained identifying
the Property maintained pursuant to such Agreement as belonging to
Customer or as being held by Custodian, on behalf of Customer or all
its customers; (v) to the extent permitted by applicable law, officers
of or auditors employed by, or other representatives of or designated
by, Custodian, including the independent public accountants of or
designated by, Customer be given access to the books and records of
such Subcustodian relating to Property or confirmation of the contents
of those records; and (vi) Custodian on behalf of Customer will
receive periodic reports with respect to the safekeeping of the
Property, including but not limited to notification of any transfer of
Property into or out of an Account.
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.
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(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 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,
including Comerica; PROVIDED, however, that the appointment of any agent shall
not relieve Custodian of its responsibilities or liabilities hereunder.
Custodian shall provide reasonable notice to Customer of the appointment or
removal of any agent.
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.
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, a statement in respect to any Property
in an Account maintained by Custodian or by a Subcustodian. 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
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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 in a securities system
or with a Subcustodian. 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 or a
Subcustodian that can provide Customer, on a daily basis, with the
ability to view on-line 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 the standard of care
set forth in Section 16 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.
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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, (ii) described in the applicable Service Standards
(the "Proxy Service"), and (iii) as may otherwise be agreed upon between
Custodian and Customer. The liability and responsibility of Custodian in
connection with the Proxy Service referred to in (ii) of the immediately
preceding sentence and in connection with any additional services which
Custodian and Customer may agree upon as provided in (iii) of the immediately
preceding sentence shall be as set forth in the description of the Proxy Service
and as may be agreed upon by Custodian and Customer in connection with the
furnishing of any such additional service and shall not be affected by any other
term of this Agreement. 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. SEGREGATED ACCOUNT. To assist Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, Custodian
shall, upon receipt of Instructions, establish and maintain a segregated account
or accounts on its books for and on behalf of a Fund.
12. SETTLEMENT PROCEDURES. Securities will be transferred, exchanged or
delivered by Custodian or a Subcustodian 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) 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. 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.
Custodian or a Subcustodian may settle purchases and sales against, or
credit income to, an Account, and Custodian may, at its sole option upon written
notice to Customer, 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 Custodian harmless from any losses
that may result therefrom. With respect to the activities of Comerica as
Subcustodian under the Subcustodian Agreement, such credits and reversals, if
any, shall be on a contractual basis, as outlined in the Comerica Service
Standards, as described below and provided to Customer by Custodian.
Service Standards shall be defined as any documents issued by the
Custodian, Comerica and other Subcustodians from time to time specifying the
procedures for communicating with a customer, the terms of any additional
services to be provided to a customer, and such other matters
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as may be agreed between the parties from time to time. Copies of the current
Service Standards have been delivered to Customer.
13. 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 relevant currency in the
Account, PROVIDED THAT, if, after all expenses, debits and withdrawals
of Cash in the relevant currency ("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 of the relevant
currency 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 funds in a
given currency in such Account are less than the aggregate purchase
price in such currency of all securities for which Custodian has
received Instructions to settle on any Settlement Date, Custodian,
upon settlement, may credit the securities to the Account by making a
conditional entry on its books and records ("Conditional Credit"),
pending receipt of sufficient immediately available funds in the
relevant currency in the Account.
(c) If, within a reasonable time from the posting of a Conditional Credit
and after all Debits applicable to the Account have been made,
immediately available funds in the relevant currency at least equal to
the aggregate purchase price in such currency of all securities
subject to a Conditional Credit on a Settlement Date are deposited
into the Account, Custodian shall make the Conditional Credit a final
entry on its books and records. In such case, Customer shall be liable
to Custodian only for late charges at a rate that Custodian
customarily charges for similar extensions of credit.
(d) If (i) within a reasonable time from the posting of a Conditional
Credit, immediately available funds at least equal to the resultant
Debit on a Settlement Date are not deposited in the Account, or (ii)
any Proceeding (as defined below) shall occur, 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 Custodian for any shortfall. 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 Custodian's
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making a Conditional Credit a final entry on its books, and, unless
consented to by Custodian, Customer shall have no right to give
further Instructions in respect of Securities subject to a Conditional
Credit. Custodian shall have the sole discretion to determine which
Securities shall be deemed to have been paid for by Customer out of
funds available in the Account. Any such Conditional Credit may be
reversed (and any corresponding Debit shall be canceled) by Custodian
unless and until 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, whether voluntary or involuntary.
(e) Customer agrees that it will not use the Account to facilitate the
purchase of securities without sufficient funds in the Account (which
funds shall not include the expected proceeds of the sale of the
purchased securities).
14. PERMITTED TRANSACTIONS. Customer agrees that it will cause transactions
to be made pursuant to this Agreement only upon Instructions in accordance with
Section 15 (but subject to Section 3) and only for the purposes listed below.
(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.
(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.
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(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 registered under the Securities Exchange Act of 1934 and
a member of the National Association of Securities Dealers, Inc.,
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 Customer.
(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) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related
transactions.
(n) Upon the termination of this Agreement as set forth in Section 21.
(o) For other proper purposes.
Customer agrees that Custodian and any Subcustodian shall have no
obligation to verify the purpose for which a transaction is being effected.
15. INSTRUCTIONS. The term "Instructions" means instructions from Customer
in respect of any of Custodian's duties hereunder that have been received by
Custodian at its address set forth in Section 22 below (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
-11-
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.
16. STANDARD OF CARE. So long as and to the extent that it is in the
exercise of reasonable care, the 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. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement, but shall be
kept indemnified by and shall be without liability to the Trust for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel acceptable to the Trust (who may be
counsel for the Trust) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
If the Trust on behalf of a Fund requires the Custodian to take any action
with respect to securities, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or its
nominee assigned to the Trust or the Fund being liable for the payment of money
or incurring liability of some other form, the Trust on behalf of the Fund, as a
prerequisite to requiring the Custodian to take such action, shall provide
indemnity to the Custodian in an amount and form satisfactory to it.
If the Trust requires the Custodian to advance cash or securities for any
purpose for the benefit of a Fund or in the event that the 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, the Custodian promptly shall
notify the Trust of the existence of any such advances, their amount and the
Fund to which the advance applies. Such advances shall be payable on demand, on
the first business day following the Trust's receipt of notice of such demand.
17. INVESTMENT LIMITATIONS AND LEGAL OR CONTRACTUAL RESTRICTIONS OR
REGULATIONS. Neither Custodian nor any Subcustodians shall be liable to Customer
or a Fund and Customer
-12-
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 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.
18. 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 agree 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, including but not limited to
amounts payable pursuant to Section 13 and pursuant to indemnities granted by
Customer under this Agreement.
19. TAX RECLAIMS. With respect to withholding taxes deducted and which may
be deducted from any income received from any Property in an Account, Custodian
shall perform such services with respect thereto as are described in the
applicable Service Standards and shall in connection therewith be subject to the
standard of care set forth in such Service Standards. Such standard of care
shall not be affected by any other term of this Agreement.
20. 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 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.
21. 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
-13-
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 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 21(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 16, 17, 18, 27 and 31 shall survive the termination of this
Agreement as to one or more or all Funds.
22. 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 answerback.
23. 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.
24. 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;
-14-
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. Should
Customer fail to pay promptly any amounts owed hereunder, Custodian shall be
entitled to use available Cash in the Account or applicable Account, as the case
may be, and to dispose of Securities in the Account or such applicable Account
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 Accounts on terms similar to those
set forth in this Section 24.
25. 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;
-15-
(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; and
26. 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.
27. GOVERNING LAW AND SUCCESSORS AND ASSIGNS. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of Customer and
Custodian.
28. THIRD-PARTY BENEFICIARY. Customer hereby acknowledges and agrees that
with respect to the Accounts:
(a) Customer authorizes Custodian to appoint Comerica as a Subcustodian
pursuant to the Subcustodian Agreement and to engage Comerica to
perform any and all functions under this Agreement on behalf of
Customer, including those enumerated in the last paragraph of Section
4.
(b) As an inducement to Comerica to act as a Subcustodian, Customer
authorizes the Custodian to bind the Customer to those terms of the
Subcustodian Agreement, including Section 23 thereof, which will
obligate the Customer to pay obligations of each Fund for Property of
such Fund custodied pursuant to the Subcustodian Agreement.
(c) Comerica may rely, as fully as if it were a party hereto and named as
"Custodian" herein, on the representations, warranties, covenants and
indemnities of Customer set forth in Sections 8(d), 16, 17, 24 and 28
of this Agreement.
29. 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.
30. SUBMISSION TO JURISDICTION. Intentionally Left Blank.
-16-
31. CONFIDENTIALITY. The Custodian agrees to treat all records and other
information relative to the Trust and its prior, present or potential
Shareholders confidentially and the Custodian on behalf of itself and its
employees agrees to keep confidential all such information, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld. The preceding notwithstanding, in the event legal
process is served upon the Custodian requiring certain disclosure, the Custodian
may divulge such information. In such event, the Custodian shall, if legally
permissible, advise the Trust of its receipt of such legal process.
32. 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.
33. 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.
34. HEADINGS. The headings of the sections hereof are included for
convenience of reference only and do not form a part of this Agreement.
35. 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.
-17-
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.
FORUM TRUST, LLC
By: /s/ XXXX X. XXXXXX
-----------------------------
Name: Xxxx X. Xxxxxx
Title: President
MONARCH FUNDS
By: /s/ XXXX X. XXXXXX
-----------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
-18-
CUSTODIAL SERVICES AGREEMENT
EXHIBIT A
LIST OF FUNDS
Daily Assets Treasury Fund
Daily Assets Government Obligations Fund
Daily Assets Government Fund
Daily Assets Cash Fund
A-1
CUSTODIAL SERVICES AGREEMENT
EXHIBIT B
FEE SCHEDULE
This Exhibit B shall be amended upon delivery by Custodian of a new Exhibit B to
Customer and acceptance thereof by Customer and shall be effective as of the
date of acceptance by Customer or a date agreed upon between Custodian and
Customer.
Annual Fee as a % of
FUND AVERAGE DAILY NET ASSETS
Total of all Funds 0.0125%
Such fees shall be accrued by the Trust daily and payable monthly in arrears on
the first day of the next month, however, no fee shall be payable hereunder with
respect to a Fund during any period in which the Fund invests all (or
substantially all) of its investment assets in a registered, open-end management
investment company, or separate series thereof, in accordance with Section
12(d)(1)(E) under the Act.
B-1
CUSTODIAL SERVICES AGREEMENT
EXHIBIT C
FORM OF SECRETARY'S CERTIFICATE
I, Xxxxxx X. Xxxxx, 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 Forum 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
---- ----- ---------
Xxxxx X. Xxxxxxxxx President
---------------------------------
Xxxx X. Xxxxxx Vice President
---------------------------------
Xxxxxx X. Xxxx Treasurer
---------------------------------
C-1
IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of June, 2003.
Monarch Funds
By: /s/ XXXXXX X. XXXXX
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: Secretary
I, Xxxxxxx X. Xxxxxxxx, Assistant Secretary of the Trust, hereby
certify that on this 6ht day of June 2003, Xxxxxx X. Xxxxx is the duly elected
Secretary of the Trust and that the signature above is her genuine signature.
Monarch Funds
By: /s/ XXXXXXX X. XXXXXXXX
-----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Assistant Secretary
C-2
D-1
CUSTODIAL SERVICES AGREEMENT
EXHIBIT D
APPROVED SUBCUSTODIANS AND SECURITIES SYSTEMS
Comerica Bank
D-1
