CUSTODY AGREEMENT
This AGREEMENT, dated as of ________, 1996, by and between
PRAGMA INVESTMENT TRUST (the "Trust"), a business trust organized
under the laws of the State of Ohio, acting with respect to the
PRAGMA PROVIDENCE FUND (the "Fund"), a series of the Trust operated
and administered by the Trust, PRAGMA, INC. ("PRAGMA"), a
corporation organized under the laws of the State of Texas and
STAR BANK, N.A. (the "Custodian"), a national banking association.
W I T N E S S E T H:
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, PRAGMA is registered as an investment adviser under
the Investment Advisers Act of 1940 and provides advisory services
to the Trust pursuant to an Investment Advisory Agreement; and
WHEREAS, under the Investment Advisory Agreement, PRAGMA is
responsible for retaining and compensating agents to provide non-
advisory services to the Trust; and
WHEREAS, PRAGMA and the Trust desire that the Fund's
Securities and cash be held and administered by the Custodian
pursuant to this Agreement; and
WHEREAS, the Custodian represents that it is a bank having
the qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements
herein made, the Trust, PRAGMA and the Custodian hereby agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1.1 "Authorized Person" means any Officer or other person
duly authorized by resolution of the Board of Trustees to give
Oral Instructions and Written Instructions on behalf of the Fund
and named in Exhibit A hereto or in such resolutions of the Board
of Trustees, certified by an Officer, as may be received by the
Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to
time serving under the Trust's Agreement and Declaration of Trust,
as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry
system as provided in Subpart O of Treasury Circular Xx. 000, 00
XXX 306, in Subpart B of 31 CFR Part 350, or in such book-entry
regulations of federal agencies as are substantially in the form
of such Subpart O.
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1.4 "Business Day" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the Trust computes the net asset value of Shares of
the Fund.
1.5 "NASD" shall mean The National Association of
Securities Dealers, Inc.
1.6 "Officer" shall mean the Chairman of the Board, the
President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer, or any Assistant Treasurer of the Trust.
1.7 "Oral Instructions" shall mean instructions orally
transmitted to and accepted by the Custodian because such
instructions are: (i) reasonably believed by the Custodian to
have been given by an Authorized Person, (ii) recorded and kept
among the records of the Custodian made in the ordinary course of
business and (iii) orally confirmed by the Custodian. The Trust
shall cause all Oral Instructions to be confirmed by Written
Instructions prior to the end of the next Business Day. If such
Written Instructions confirming Oral Instructions are not received
by the Custodian prior to a transaction, it shall in no way affect
the validity of the transaction or the authorization thereof by
the Trust. If Oral Instructions vary from the Written
Instructions which purport to confirm them, the Custodian shall
notify the Trust of such variance but such Oral Instructions will
govern unless the Custodian has not yet acted.
1.8 "Fund Custody Account" shall mean the account in the
name of the Trust, which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing
Written Instructions when deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Depository Trust
Company and (provided that Custodian shall have received a copy of
a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a
depository for the Fund) any other clearing agency registered with
the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934, as amended (the "1934 Act"),
which acts as a system for the central handling of Securities
where all Securities of any particular class or series of an
issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical
delivery of the Securities.
1.11 "Securities" shall include, without limitation, common
and preferred stocks, bonds, call options, put options,
debentures, notes, bank certificates of deposit, bankers'
acceptances, mortgage-backed securities or other obligations, and
any certificates, receipts, warrants or other instruments or
documents representing rights to receive, purchase or subscribe
for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the
Custodian has the facilities to clear and to service.
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1.12 "Shares" shall mean the units of beneficial interest
issued by the Trust on account of the Fund.
1.13 "Written Instructions" shall mean (i) written
communications actually received by the Custodian and signed by an
Authorized Person, or (ii) communications by telex or any other
such system from one or more persons reasonably believed by the
Custodian to be Authorized Persons, or (iii) communications
between electro-mechanical or electronic devices provided that the
use of such devices and the procedures for the use thereof shall
have been approved by resolutions of the Board of Trustees, a copy
of which, certified by an Officer, shall have been delivered to
the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust and PRAGMA hereby
constitute and appoint the Custodian as custodian of all
Securities and cash owned by or in the possession of the Fund at
any time during the period of this Agreement.
2.2 Acceptance. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties thereof as
hereinafter set forth.
2.3 Documents to be Furnished. The following documents,
including any amendments thereto, will be provided
contemporaneously with the execution of the Agreement to the
Custodian by the Trust:
a. A copy of the Declaration of Trust of the Trust
certified by the Secretary;
b. A copy of the Bylaws of the Trust certified by the
Secretary;
c. A copy of the resolution of the Board of Trustees
of the Trust appointing the Custodian, certified by
the Secretary;
d. A copy of the then current Prospectus of the Fund;
and
e. A certification of the President and Secretary of
the Trust setting forth the names and signatures of
the current Officers of the Trust and other
Authorized Persons.
2.4 Notice of Appointment of Dividend and Transfer Agent.
The Trust and PRAGMA agree to notify the Custodian in writing of
the appointment, termination or change in appointment of any
Dividend and Transfer Agent of the Fund.
PAGE
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held
by the Custodian for the account of the Fund (other than
Securities maintained in a Securities Depository or Book-Entry
System) shall be physically segregated from other Securities and
non-cash property in the possession of the Custodian and shall be
identified as subject to this Agreement.
3.2 Fund Custody Account. The Custodian shall open and
maintain in its trust department a custody account in the name of
the Trust coupled with the name of the Fund, subject only to draft
or order of the Custodian, in which the Custodian shall enter and
carry all Securities, cash and other assets of the Fund which are
delivered to it.
3.3 Appointment of Agents. In its discretion, the Custodian
may appoint, and at any time remove, any domestic bank or trust company,
which has been approved by the Board of Trustees and is qualified to
act as custodian under 1940 Act, as sub-custodians to hold Securities
and cash of the Fund and to carry out such other provisions of
this Agreement as it may determine, provided, however, that the
appointment of any such agents and maintenance of any Securities
and cash of the Fund shall be at the Custodian's expense and shall
not relieve the Custodian of any of its obligations or liabilities
under this Agreement.
3.4 Delivery of Assets to Custodian. The Trust shall
deliver, or cause to be delivered, to the Custodian all of the
Fund's Securities, cash and other assets, including (a) all
payments of income, payments of principal and capital
distributions received by the Fund with respect to such
Securities, cash or other assets owned by the Fund at any time
during the period of this Agreement, and (b) all cash received by
the Fund for the issuance, at any time during such period, of
Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Fund in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
(a) Prior to a deposit of Securities of the Fund in any
Securities Depository or Book-Entry System, the Trust
shall deliver to the Custodian a resolution of the Board
of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to
deposit in such Securities Depository or Book-Entry
System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry
System to the extent possible and practical in
connection with its performance hereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities,
and deliveries and returns of collateral consisting of
Securities.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-
Entry System or Securities Depository which includes
only assets held by the Custodian as a fiduciary,
custodian or otherwise for customers.
(c) The records of the Custodian with respect to Securities
of the Fund maintained in a Book-Entry System or
Securities Depository shall, by book-entry, identify
such Securities as belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a
Book-Entry System or Securities Depository, the
Custodian shall pay for such Securities upon (i) receipt
of advice from the Book-Entry System or Securities
Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such payment
and transfer for the account of the Fund. If Securities
sold by the Fund are held in a Book-Entry System or
Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-
Entry System or Securities Depository that payment for
such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer and payment
for the account of the Fund.
(e) The Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry
System or Securities Depository in which Securities of
the Fund are kept) on the internal accounting controls
and procedures for safeguarding Securities deposited in
such Book-Entry System or Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Fund resulting (i)
from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful
misconduct on the part of Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above or any of its or
their employees, or (ii) from failure of Custodian or
any such Sub-Custodian to enforce effectively such
rights as it may have against a Book-Entry System or
Securities Depository. At its election, the Trust shall
be subrogated to the rights of the Custodian with
respect to any claim against a Book-Entry System or
Securities Depository or any other person from any loss
or damage to the Fund arising from the use of such Book-
Entry System or Securities Depository, if and to the
extent that the Fund has not been made whole for any
such loss or damage.
3.6 Disbursement of Moneys from Fund Custody Account. Upon
receipt of Proper Instructions, the Custodian shall disburse
moneys from the Fund Custody Account but only in the following
cases:
(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only
(i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or
any Sub-Custodian appointed pursuant to Section 3.3
above) of such Securities registered as provided in
Section 3.9 below or in proper form for transfer, or if
the purchase of such Securities is effected through a
Book-Entry System or Securities Depository, in
accordance with the conditions set forth in Section 3.5
above; (ii) in the case of options on Securities,
against delivery to the Custodian (or such Sub-
Custodian) of such receipts as are required by the
customs prevailing among dealers in such options; (iii)
in the case of futures contracts and options on futures
contracts, against delivery to the Custodian (or such
Sub-Custodian) of evidence of title thereto in favor of
the Fund or any nominee referred to in Section 3.9
below; and (iv) in the case of repurchase or reverse
repurchase agreements entered into between the Trust and
a bank which is a member of the Federal Reserve System
or between the Trust and a primary dealer in U.S.
Government securities, against delivery of the purchased
Securities either in certificate form or through an
entry crediting the Custodian's account at a Book-Entry
System or Securities Depository with such Securities;
(b) In connection with the conversion, exchange or
surrender, as set forth in Section 3.7(f) below, of
Securities owned by the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided
in Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: interest; taxes;
investment advisory fees; trustee fees and expenses; and
other operating expenses of the Fund; in all cases,
whether or not such expenses are to be in whole or in
part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national
securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Fund;
PAGE
(g) For transfer in accordance with the provision of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or
other interest-bearing account with any banking
institution (including the Custodian), which deposit or
account has a term of one year or less; and
(i) For any other proper purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a
resolution of the Board of Trustees, certified by an
Officer, specifying the amount and purpose of such
payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such
payment is to be made.
3.7 Delivery of Securities from Fund Custody Account. Upon
receipt of Proper Instructions, the Custodian shall release and
deliver Securities from the Fund Custody Account but only in the
following cases:
(a) Upon the sale of Securities for the account of the Fund
but only against receipt of payment therefor in cash, by
certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with
tender or other similar offers for Securities of the
Fund; provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into
the name of the Fund, the Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above, or of any
nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the
new Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case,
the new Securities and cash, if any, are to be delivered
to the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by the Fund;
(h) In the case of warrants, rights or similar Securities,
upon the exercise thereof, provided that, in any such
case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(i) For delivery in connection with any loans of Securities
of the Fund, but only against receipt of such collateral
as the Trust shall have specified to the Custodian in
Proper Instructions;
(j) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by
the Trust, but only against receipt by the Custodian of
the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Trust;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the
Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon
receipt, in addition to Proper Instructions, of a copy
of a resolution of the Board of Trustees, certified by
an Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless
otherwise instructed by the Trust, the Custodian shall with
respect to all Securities held for the Fund:
PAGE
(a) Subject to Section 7.4 below, collect on a timely basis
all income and other payments to which the Fund is
entitled either by law or pursuant to custom in the
securities business;
(b) Present for payment and, subject to Section 7.4 below,
collect on a timely basis the amount payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with Securities
and assets of the Fund.
3.9 Registration and Transfer of Securities. All Securities
held for the Fund that are issued or issuable only in bearer form
shall be held by the Custodian in that form, provided that any
such Securities shall be held in a Book-Entry System if eligible
therefor. All other Securities held for the Fund may be
registered in the name of the Fund, the Custodian, or any Sub-
Custodian appointed pursuant to Section 3.3 above, or in the name
of any nominee of any of them, or in the name of a Book-Entry
System, Securities Depository or any nominee of either thereof.
The Trust shall furnish to the Custodian appropriate instruments
to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or
Securities Depository, any Securities registered in the name of
the Fund.
3.10 Records. (a) The Custodian shall maintain complete and
accurate records with respect to Securities, cash or other
property held for the Fund, including (i) journals or other
records of original entry containing an itemized daily record in
detail of all receipts and deliveries of Securities and all
receipts and disbursements of cash; (ii) ledgers (or other
records) reflecting (A) Securities in transfer, (B) Securities in
physical possession, (C) monies and Securities borrowed and monies
and Securities loaned (together with a record of the collateral
therefor and substitutions of such collateral), (D) dividends and
interest received, and (E) dividends receivable and interest
receivable; and (iii) canceled checks and bank records related
thereto. The Custodian shall keep such other books and records of
the Fund as the Trust shall reasonably request, or as may be
required by the 1940 Act, including, but not limited to, Section
31 of the 1940 Act and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian
shall (i) be maintained in a form acceptable to the Trust and in
compliance with rules and regulations of the Securities and
Exchange Commission, (ii) be the property of the Trust and at all
times during the regular business hours of the Custodian be made
available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the
Securities and Exchange Commission, and (iii) if required to be
maintained by Rule 31a-1 under the 1940 Act, be preserved for the
periods prescribed in Rule 31a-2 under the 0000 Xxx.
3.11 Fund Reports by Custodian. The Custodian shall furnish
the Trust with a daily activity statement and a summary of all
transfers to or from the Fund Custody Account on the day following
such transfers. At least monthly and from time to time, the
Custodian shall furnish the Trust with a detailed statement of the
Securities and moneys held by the Custodian and the Sub-Custodians
for the Fund under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall
provide the Trust with such reports, as the Trust may reasonably
request from time to time, on the internal accounting controls and
procedures for safeguarding Securities, which are employed by the
Custodian or any Sub-Custodian appointed pursuant to Section 3.3
above.
3.13 Proxies and Other Materials. The Custodian shall cause
all proxies relating to Securities which are not registered in the
name of the Fund, to be promptly executed by the registered holder
of such Securities, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to the Trust
such proxies, all proxy soliciting materials and all notices
relating to such Securities.
3.14 Information on Corporate Actions. The Custodian shall
promptly deliver to the Trust all information received by the
Custodian and pertaining to Securities being held by the Fund
with respect to optional tender or exchange offers, calls for
redemption or purchase, or expiration of rights as described in
the Standards of Service Guide attached as Exhibit B. If the
Trust desires to take action with respect to any tender offer,
exchange offer or other similar transaction, the Trust shall
notify the Custodian at least five Business Days prior to the date
on which the Custodian is to take such action. The Trust will
provide or cause to be provided to the Custodian all relevant
information for any Security which has unique put/option
provisions at least five Business Days prior to the beginning date
of the tender period.
PAGE
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of
Securities for the Fund, Written Instructions shall be delivered
to the Custodian, specifying (a) the name of the issuer or writer
of such Securities, and the title or other description thereof,
(b) the number of shares, principal amount (and accrued interest,
if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom
such amount is payable. The Custodian shall upon receipt of such
Securities purchased by the Fund pay out of the moneys held for
the account of the Fund the total amount specified in such Written
Instructions to the person named therein. The Custodian shall not
be under any obligation to pay out moneys to cover the cost of a
purchase of Securities for the Fund, if in the Fund Custody
Account there is insufficient cash available to the Fund for which
such purchase was made.
4.2 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where payment for the
purchase of Securities for the Fund is made by the Custodian in
advance of receipt of the Securities purchased but in the absence
of specified Written Instructions to so pay in advance, the
Custodian shall be liable to the Fund for such Securities to the
same extent as if the Securities had been received by the
Custodian.
4.3 Sale of Securities. Promptly upon each sale of
Securities by the Fund, Written Instructions shall be delivered to
the Custodian, specifying (a) the name of the issuer or writer of
such Securities, and the title or other description thereof, (b)
the number of shares, principal amount (and accrued interest, if
any), or other units sold, (c) the date of sale and settlement,
(d) the sale price per unit, (e) the total amount payable upon
such sale, and (f) the person to whom such Securities are to be
delivered. Upon receipt of the total amount payable to the Fund
as specified in such Written Instructions, the Custodian shall
deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may
deliver Securities and arrange for payment in accordance with the
customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section
4.3 above or any other provision of this Agreement, the Custodian,
when instructed to deliver Securities against payment, shall be
entitled, if in accordance with generally accepted market
practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund shall bear the
risk that final payment for such Securities may not be made or
that such Securities may be returned or otherwise held or disposed
of by or through the person to whom they were delivered, and the
Custodian shall have no liability for any for the foregoing.
PAGE
4.5 Payment for Securities Sold, etc. In its sole
discretion and from time to time, the Custodian may credit the
Fund Custody Account, prior to actual receipt of final payment
thereof, with (i) proceeds from the sale of Securities which it
has been instructed to deliver against payment, (ii) proceeds from
the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of the Fund.
Any such credit shall be conditional upon actual receipt by
Custodian of final payment and may be reversed if final payment is
not actually received in full. The Custodian may, in its sole
discretion and from time to time, permit the Fund to use funds so
credited to the Fund Custody Account in anticipation of actual
receipt of final payment. Any such funds shall be repayable
immediately upon demand made by the Custodian at any time prior to
the actual receipt of all final payments in anticipation of which
funds were credited to the Fund Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian
may, in its sole discretion and from time to time, advance funds
to the Trust to facilitate the settlement of the Fund's
transactions in the Fund Custody Account. Any such advance shall
be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 Transfer of Funds. From such funds as may be available
for the purpose in the Fund Custody Account, and upon receipt of
Proper Instructions specifying that the funds are required to
redeem Shares of the Fund, the Custodian shall wire each amount
specified in such Proper Instructions to or through such bank as
the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not
be under any obligation to effect payment or distribution by any
bank designated in Proper Instructions given pursuant to Section
5.1 above of any amount paid by the Custodian to such bank in
accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall
establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be
transferred cash and/or Securities, including Securities
maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the
Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in
connection with securities options purchased or written
by the Fund or in connection with financial futures
contracts (or options thereon) purchased or sold by the
Fund,
(c) which constitute collateral for loans of Securities made
by the Fund,
(d) for purposes of compliance by the Fund with requirements
under the 1940 Act for the maintenance of segregated
accounts by registered investment companies in
connection with reverse repurchase agreements and when-
issued, delayed delivery and firm commitment
transactions, and
(e) for other proper corporate purposes, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees,
certified by an Officer, setting forth the purpose or
purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the
exercise of reasonable care in carrying out its obligations under
this Agreement, and shall be without liability to the Trust or the
Fund for any loss, damage, cost, expense (including attorneys'
fees and disbursements), liability or claim unless such loss,
damage, cost, expense, liability or claim arises from negligence,
bad faith or willful misconduct on its part or on the part of any
Sub-Custodian appointed pursuant to Section 3.3 above. The
Custodian shall be entitled to rely on and may act upon advice of
counsel on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. The
Custodian shall promptly notify the Trust of any action taken or
omitted by the Custodian pursuant to advice of counsel. The
Custodian shall not be under any obligation at any time to
ascertain whether the Trust or the Fund is in compliance with the
1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or by-laws, or its investment objectives
and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be
liable for, or considered to be the custodian of, any cash
belonging to the Fund or any money represented by a check, draft
or other instrument for the payment of money, until the Custodian
or its agents actually receive such cash or collect on such
instrument.
7.3 No Responsibility for Title, etc. 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
or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be
required to enforce collection, by legal means or otherwise, of
any money or property due and payable with respect to Securities
held for the Fund if such Securities are in default or payment is
not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian
shall be entitled to rely upon any certificate, notice or other
instrument in writing received by it and reasonably believed by it
to be genuine. The Custodian shall be entitled to rely upon any
Oral Instructions and any Written Instructions actually received
by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties
or obligations whatsoever except such duties and obligations as
are specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
7.7 Co-operation. The Custodian shall cooperate with and
supply necessary information to the entity or entities appointed
by the Trust to keep the books of account of the Fund and/or
compute the value of the assets of the Fund. The Custodian shall
take all such reasonable actions as the Trust may from time to
time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with
respect to the Custodian's activities hereunder in connection with
(a) the preparation of the Trust's reports on Form N-1A and Form
N-SAR and any other reports required by the Securities and
Exchange Commission, and (b) the fulfillment by the Trust of any
other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Trust. The Trust and PRAGMA shall
indemnify and hold harmless the Custodian and any Sub-Custodian
appointed pursuant to Section 3.3 above, and any nominee of the
Custodian or of such Sub-Custodian, from and against any loss,
damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation,
liability arising under the Securities Act of 1933, the 1934 Act,
the 1940 Act, and any state or foreign securities and/or banking
laws) or claim arising directly or indirectly (a) from the fact
that Securities are registered in the name of any such nominee, or
(b) from any action or inaction by the Custodian or such Sub-
Custodian (i) at the request or direction of or in reliance on the
advice of the Trust, or (ii) upon Proper Instructions, or (c)
generally, from the performance of its obligations under this
Agreement or any sub-custody agreement with a Sub-Custodian
appointed pursuant to Section 3.3 above, provided that neither the
Custodian nor any such Sub-Custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense,
liability or claim arising from the Custodian's or such Sub-
Custodian's negligence, bad faith or willful misconduct.
8.2 Indemnification by Custodian. The Custodian shall
indemnify and hold harmless the Trust and PRAGMA from and against
any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including without limitation, liability
arising under the Securities Act of 1933, the 1934 Act, the 1940
Act, and any state or foreign securities and/or banking laws) or
claim arising from the negligence, bad faith or willful misconduct
of the Custodian or any Sub-Custodian appointed pursuant to
Section 3.3 above, or any nominee of the Custodian or of such Sub-
Custodian.
8.3 Indemnity to be Provided. If the Trust requests the
Custodian to take any action with respect to Securities, which
may, in the opinion of the Custodian, result in the Custodian or
its nominee becoming liable for the payment of money or incurring
liability of some other form, the Custodian shall not be required
to take such action until the Trust shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to
the Custodian.
8.4 Security. If the Custodian advances cash or Securities
to the Fund for any purpose, either at the Trust's request or as
otherwise contemplated in this Agreement, or in the event that the
Custodian or its nominee incurs, in connection with its
performance under this Agreement, any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence,
bad faith or willful misconduct), then, in any such event, any
property at any time held for the account of the Fund shall be
security therefor, and should the Trust or PRAGMA fail promptly to
repay or indemnify the Custodian, the Custodian shall be entitled
to utilize available cash of the Fund and to dispose of other
assets of the Fund to the extent necessary to obtain reimbursement
or indemnification.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian, the Trust nor PRAGMA shall be liable
for any failure or delay in performance of its obligations under
this Agreement arising out of or caused, directly or indirectly,
by circumstances beyond its reasonable control, including, without
limitation, acts of God; earthquakes; fires; floods; wars; civil
or military disturbances; sabotage; strikes; epidemics; riots;
power failures; computer failure and any such circumstances beyond
its reasonable control as may cause interruption, loss or
malfunction of utility, transportation, computer (hardware or
software) or telephone communication service; accidents; labor
disputes; acts of civil or military authority; governmental
actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event
of a failure or delay (i) shall not discriminate against the Fund
in favor of any other customer of the Custodian in making computer
time and personnel available to input or process the transactions
PAGE
contemplated by this Agreement and (ii) shall use its best efforts
to ameliorate the effects of any such failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become
effective as of its execution and shall continue in full force and
effect until terminated as hereinafter provided.
10.2 Termination. Any party hereto may terminate this
Agreement by giving to the other parties a notice in writing
specifying the date of such termination, which shall be not less
than sixty (60) days after the date of the giving of such notice.
If a successor custodian shall have been appointed by the Board of
Trustees, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of
termination (a) deliver directly to the successor custodian all
Securities (other than Securities held in a Book-Entry System or
Securities Depository) and cash then owned by the Fund and held by
the Custodian as custodian, and (b) transfer any Securities held
in a Book-Entry System or Securities Depository to an account of
or for the benefit of the Fund at the successor custodian,
provided that PRAGMA shall have paid to the Custodian, on behalf
of the Trust, all fees, expenses and other amounts to the payment
or reimbursement of which it shall then be entitled. Upon such
delivery and transfer, the Custodian shall be relieved of all
obligations under this Agreement. The Trust may at any time
immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by
regulatory authorities or upon the happening of a like event at
the direction of an appropriate regulatory agency or court of
competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Trust on or before the date of
termination specified pursuant to Section 10.1 above, then the
Custodian shall have the right to deliver to a bank or trust
company of its own selection, which (a) is a "bank" as defined in
the 1940 Act and (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not
less than $25 million, all Securities, cash and other property
held by Custodian under this Agreement and to transfer to an
account of or for the Fund at such bank or trust company all
Securities of the Fund held in a Book-Entry System or Securities
Depository. Upon such delivery and transfer, such bank or trust
company shall be the successor custodian under this Agreement and
the Custodian shall be relieved of all obligations under this
Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
PRAGMA shall compensate the Custodian as agreed upon from
time to time by the parties. The fees and other charges in effect
on the date hereof and applicable to the Fund are set forth in
Exhibit C attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Trust
personally, but shall bind only the trust property of the Trust as
provided in the Trust's Agreement and Declaration of Trust, as
from time to time amended. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement
has been signed and delivered by an authorized officer of the
Trust, acting as such, and neither such authorization by the
Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the
trust property of the Trust as provided in the above-mentioned
Agreement and Declaration of Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices,
instructions, and other communications to be given hereunder shall
be in writing and shall be sent or delivered to the recipient at
the address set forth after its name hereinbelow:
To the Trust or to PRAGMA:
--------------------------
PRAGMA Investment Trust
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000 - XX 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Custodian:
-------------
Star Bank, N.A.
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Mutual Fund-Operations
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address as any party shall have provided to any
other by notice given in accordance with this Article XIII.
Writing shall include transmissions by or through teletype,
facsimile, central processing unit connection, on-line terminal
and magnetic tape.
PAGE
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Trust shall not circulate
any printed matter which contains any reference to Custodian
without the prior written approval of Custodian, excepting printed
matter contained in the prospectus or statement of additional
information for the Fund and such other printed matter as merely
identifies Custodian as custodian for the Fund. The Trust shall
submit printed matter requiring approval to Custodian in draft
form, allowing sufficient time for review by Custodian and its
counsel prior to any deadline for printing.
14.3 No Waiver. No failure by any party hereto to exercise,
and no delay by such party in exercising, any right hereunder
shall operate as a waiver thereof. The exercise by any party
hereto of any right hereunder shall not preclude the exercise of
any other right, and the remedies provided herein are cumulative
and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally
and no amendment to this Agreement shall be effective unless
evidenced by an instrument in writing executed by the parties
hereto.
14.5 Counterparts. This Agreement may be executed in one or
more counterparts, and by the parties hereto on separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
14.6 Severability. If any provision of this Agreement shall
be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
14.7 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by any party hereto
without the written consent of the other parties hereto.
14.8 Headings. The headings of sections in this Agreement
are for convenience of reference only and shall not affect the
meaning or construction of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed and delivered in its name and on its
behalf by its representatives thereunto duly authorized, all as of
the day and year first above written.
PAGE
ATTEST: PRAGMA INVESTMENT TRUST
______________________________ By:_____________________________
President
ATTEST: PRAGMA, INC.
______________________________ By:_____________________________
President
ATTEST: STAR BANK, N.A.
______________________________ By:____________________________
PAGE
EXHIBIT A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the
persons authorized by the Trust to administer the Fund Custody
Account.
Name Signature
Xxxx X. Xxxxx, xx. ______________________________
Xxxx X. Xxxxx, III ______________________________
Xxxx X. Xxxxxx ______________________________
Xxxxxx X. Xxxxxx ______________________________
Xxxx X. Xxxxx ______________________________
M. Xxxxxxxx Xxxxxxx ______________________________
