EXHIBIT 23(H)(1)
OPERATING SERVICES AGREEMENT BETWEEN REGISTRANT AND
LEVERAGED INDEX MANAGEMENT COMPANY
Operating Services Agreement
Optimal Funds, Inc.
This Agreement is made and entered into as of the 1st day of May, 1999, by
and between Optimal Funds, Inc., a Maryland corporation (the "Fund"), and
Leveraged Index Management Company, a Vermont corporation (hereinafter referred
to as "Manager").
WHEREAS, the Fund is a diversified, open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"), and
authorized to issue shares representing interests in The Optimal Fund (the
"Portfolio"); and
WHEREAS, Manager is registered as an investment advisor under the
Investment Advisors Act of 1940, and engages in the business of asset management
and the provision of certain other administrative and record keeping services in
connection therewith; and
WHEREAS, the Fund wishes to engage Manager, to provide, or arrange for the
provision of, certain operational services which are necessary for the
day-to-day operations of the Portfolio in the manner and on the terms and
conditions hereinafter set forth, and Manager wishes to accept such engagement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and Manager agree as follows:
1. Obligations of Manager
(a) Services. The Fund hereby retains Manager to provide, or, upon receipt of
written approval of the Fund arrange for other companies to provide, the
following services to the Portfolio in the manner and to the extent that
such services are reasonably necessary for the operation of the Portfolio
(collectively, the "Services"):
(1) accounting services and functions, including costs and expenses of any
independent public accountants;
(2) non-litigation related legal and compliance services, including the
expenses of maintaining registration and qualification of the Fund and
the Portfolio under federal, state and any other applicable laws and
regulations;
(3) dividend disbursing agent, dividend reinvestment agent, transfer
agent, and registrar services and functions (including answering
inquiries related to shareholder Portfolio accounts);
(4) custodian and depository services and functions;
(5) distribution, marketing, and/or underwriting services;
(6) independent pricing services;
(7) preparation of reports describing the operations of the Portfolio,
including the costs of providing such reports to broker-dealers,
financial institutions and other organizations which render services
and assistance in connection with the distribution of shares of the
Portfolio;
(8) sub-accounting and recordkeeping services and functions (other than
those books and records required to be maintained by Manager under the
Investment Advisory Agreement between the Fund and Manager dated
August 15, 1998), including maintenance of shareholder records and
shareholder information concerning the status of their Portfolio
accounts by investment advisors, broker-dealers, financial
institutions, and other organizations on behalf of Manager;
(9) shareholder and board of directors communication services, including
the costs of preparing, printing and distributing notices of
shareholders' meetings, proxy statements, prospectuses, statements of
additional information, Portfolio reports, and other communications to
the Fund's Portfolio shareholders, as well as all expenses of
shareholders' and board of directors' meetings, including the
compensation and reimbursable expenses of the directors of the Fund;
(10) other day-to-day administrative services, including the costs of
designing, printing, and issuing certificates representing shares of
the Portfolio, and premiums for the fidelity bond maintained by the
Fund pursuant to Section 17(g) of the Act and rules promulgated
thereunder (except for such premiums as may be allocated to third
parties, as insureds thereunder).
(b) Exclusions from Service. Notwithstanding the provisions of Paragraph 1(a)
above, the Services shall not include and Manager will not be responsible
for any of the following:
(1) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Fund or the Portfolio in connection with securities
transactions to which the Fund or the Portfolio is a party or in
connection with securities owned by the Fund or the Portfolio;
(2) the interest on indebtedness, if any, incurred by the Fund or the
Portfolio;
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(3) the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or the Portfolio
to federal, state, county, city, or other governmental agents;
(4) the expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund or the Portfolio;
and
(5) any other extraordinary expense of the Fund or Portfolio.
(c) Books and Records. All books and records prepared and maintained by
Manager for the Fund under this Agreement shall be the property of the
Fund and, upon request therefor, Manager shall surrender to the Fund
such of the books and records so requested.
(d) Staff and Facilities. Manager assumes and shall pay for maintaining
the staff, personnel, space, equipment and facilities necessary to
perform its obligations under this Agreement.
2. Obligations of the Fund
(a) Fee. The Fund will pay to Manager on the last day of each month a fee at an
annual rate equal to 0.95% of average net asset of the Portfolio, such fee
to be computed daily based upon the net asset value of the Portfolio as
determined by a valuation made in accordance with the Fund's procedure for
calculating Portfolio net asset value as described in the Fund's Prospectus
and/or Statement of Additional Information. During any period when the
determination of a Portfolio's net asset value is suspended by the
directors of the Fund, the net asset value of a share of that Portfolio as
of the last business day prior to such suspension shall, for the purpose of
this Paragraph 2(a), be deemed to be the net asset value at the close of
each succeeding business day until it is again determined.
(b) Information. The Fund will, from time to time, furnish or otherwise make
available to Manager such information relating to the business and affairs
of the Portfolio as Manager may reasonably require in order to discharge
its duties and obligations hereunder.
3. Term.
This Agreement shall remain in effect until no later than April 30, 2001, and
from year to year thereafter provided such continuance is approved at least
annually by (1) the vote of a majority of the Board of Directors of the Fund or
(2) a vote of a "majority" (as that term is defined in the Investment Company
Act of 1940) of the Fund's outstanding securities, provided that in either event
the continuance is also approved by the vote of a majority of the directors of
the Fund who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that;
(a) the Fund, at any time and without the payment of any penalty may
terminate this Agreement upon 120 days written notice to Manager;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder);
and
(c) Manager may terminate this Agreement without payment of penalty on 120
days written notice to the Fund.
4. Notices.
Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
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If to the Fund: If to the Manager:
Optimal Funds, Inc. Leveraged Index Management Company
213 G VT Route 15 213 G VT Xxxxx 00
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxx Attn: Xxxxxxxx X. Xxxxxxx
President President
5. Miscellaneous
(a) Performance Review. Manager will permit representatives of the Fund,
including the Fund's independent auditors, to have reasonable access
to the personnel and records of Manager in order to enable such
representatives to monitor the quality of services being provided and
the level of fees due Manager pursuant to this Agreement. In addition,
Manager shall promptly deliver to the board of directors of the Fund
such information as may reasonably be requested from time to time to
permit the board of directors to make an informed determination
regarding continuation of this Agreement and the payments contemplated
to be made hereunder.
(b) Choice of Law. This Agreement shall be construed in accordance with
the laws of the State of Maryland and the applicable provisions of the
Act. To the extent the applicable law of the State of Maryland or any
of the provisions herein conflict with the applicable provisions of
the Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
Optimal Funds, Inc. Leveraged Index Management Company
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By: Xxxxxxxx X. Xxxxxxx By: Xxxxxxxx X. Xxxxxxx
President President
ATTEST: ATTEST:
By: __________________________ By: __________________________
Secretary Secretary
