Version 9/12/03
FORM OF TRANSFER AGENCY AND SUB-ADMINISTRATION AGREEMENT
AGREEMENT made as of the ____ day of ____________, 2003, between AMERICAN
EXPRESS FINANCIAL CORPORATION ("AEFC"), a ________________________ having its
principal place of business at 50611 AXP Financial Center, Xxxxxxxxxxx, XX
00000, and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having
its principal place of business at 0000 Xxxxxxx Xxxx, Xxxxxxxx, XX 00000.
WHEREAS, AEFC serves as both the investment manager and administrator to
ADVISORY HEDGED OPPORTUNITY FUND (the "Company"), a Delaware statutory trust,
having its principal place of business at 50611 AXP Financial Center,
Xxxxxxxxxxx, XX 00000, and in such capacity has been authorized to engage third
parties to provide certain services to the Company; and
WHEREAS, the Company is registered as a closed-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and currently intends to invest its assets primarily in "Investment Vehicles,"
as that term is defined in the Prospectus of the Company dated ________________,
2003 (together with the Company's Statement of Additional Information, each as
amended and in effect from time to time, the "Prospectus"); and
WHEREAS, the Company has registered the offering and sale of its shares
(the "Shares") under the Securities Act of 1933, as amended, (the "Securities
Act");
WHEREAS, AEFC desires that BISYS assist it, in its capacity as
Administrator, by providing certain fund accounting and financial reporting,
administrative and tax allocation services for the Company, and that BISYS act
as transfer agent and provide certain transfer agency services relating to the
investors that purchase Shares ("Shareholders"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Transfer Agent and Sub-Administrator
(a) Maintenance of Books and Records. BISYS will keep and maintain the
following books and records pursuant to Rule 31a-1 (the "Rule") under the 1940
Act:
(i) Journals containing an itemized daily record in detail of all
purchases and sales of securities (including interests in Investment
Vehicles), all receipts and disbursements of cash and all other debits
and credits, as required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including interest
accrued and interest received, as required by subsection
(b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsections (b)(2)(ii) and
(iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the
Rule.
(b) Fund Administration and Tax Reporting. In addition to the maintenance
of the books and records specified above, BISYS shall perform the following
accounting services (monthly, unless expressly provided otherwise):
(i) Obtain and monitor receipt of monthly values from Investment
Vehicles' managers or administrators, compute market value of the
portfolio monthly within the time period and in the manner
described in the Company's Prospectus, and strike and issue total
and per Share NAVs for the Company (all in accordance with the
Company's valuation policy) by an agreed upon date in each
subsequent month.
(ii) Verify and reconcile with the Company's custodian weekly cash
balances and changes in Company holdings of Investment Vehicles.
(iii) Calculate contractual expenses of the Company, including
calculation of management fees and expense
waivers/reimbursements, in accordance with the relevant contracts
and the Prospectus (if applicable).
(iv) Accrue Company expenses according to instructions received from
AEFC.
(v) Determine the outstanding receivables and payables for all (1)
Investment Vehicle trades, (2) Share transactions, and (3) income
and expense accounts.
(vi) Record all Company expenses and all income and reimbursements
according to instructions received from AEFC.
(vii) Maintain the book and tax basis of each Investment Vehicle.
(viii) Obtain subscription and redemption confirmations from
Investment Vehicles in accordance with purchase information
provided by AEFC.
(ix) Prepare statement of assets and liabilities and statement of
operations.
(x) Calculate excise tax and spillback distributions for the
Company's auditor.
-2-
(xi) Prepare accounting reports, and monitor and advise the Company
and AEFC regarding the Company's regulated investment company
status under the Internal Revenue Code of 1986, as amended.
(xii) Prepare condensed monthly and quarterly financial information
for review by AEFC including trial balances, portfolio
appraisals, expense summaries, and investor account summaries.
(xiii) Provide accounting reports in connection with the annual audit
performed by the Company's auditor and provide the auditor with
access to the Company's books and records.
(xiv) Prepare, file and distribute semi-annual and annual financial
statements. Obtain and include, as required and available,
related certifications and reports.
(xv) Assist AEFC as requested in developing compliance procedures for
the Company, including compliance with the Company's investment
objective, defined investment policies, restrictions, anti-money
laundering program (the "AML Program"), and tax diversification,
distribution and income requirements; monitor compliance with the
Company's investment objective and investment policies as are
determinable based upon the Company's records, and make reports
regarding such compliance available to the Company's Board of
Trustees (the "Board").
(xvi) Assist with regulatory audits and examinations of the Company
and of AEFC as related to the Company including providing
accounting reports of the Company for such audits and
examinations.
(xvii) Provide assistance and guidance to the Company and AEFC with
respect to matters governed by or related to regulatory
requirements and developments by monitoring regulatory and
legislative developments which may effect the Company, and
assisting in strategic planning in response thereto.
(c) Transfer Agent/Investor Services. BISYS shall also maintain accounts of
Shareholders on its investor record-keeping systems, and provide the following
investor services in connection therewith:
(i) Maintain the Share register; process purchases, redemptions, and
transfers of Shares; maintain Shareholder records, including
account documentation files, and record Shareholder account
information changes; provided that all of the foregoing shall be
based upon documentation and information received from AEFC, and
provided further that BISYS will not be responsible for
conducting investor suitability or anti-money laundering checks.
(ii) Prepare and issue Shareholder confirmations in compliance with
Rule 10b-10 of the Securities Exchange Act of 1934, as
amended, to institutional Shareholders (BISYS shall not issue
confirmations to non-institutional Shareholders).
(iii) Prepare and issue periodic account statements to institutional
Shareholders (BISYS shall not prepare or issue periodic
account statements to non-institutional Shareholders).
(iv) Prepare and distribute Forms 1099 to institutional
Shareholders, as applicable. (BISYS shall not prepare or issue
Forms 1099 to non-institutional Shareholders).
(v) Manage the Company's tender offer process (no more frequently
than quarterly), including distribution of tender offer
materials to all Shareholders, recording Shareholder replies
and responding to Shareholder questions regarding tender offer
process.
(vi) Process dividend and capital gains payments, including the
purchase of new shares through reinvestment.
(vii) Monitor the movement of escrow money for subscriptions of
institutional Shareholders, monitor receipt of money in
connection with tender offers and reconcile the Company's bank
accounts. (BISYS shall not coordinate or monitor the movement
of escrow money for subscriptions of non-institutional
Shareholders to non-institutional Shareholders)
(viii) At AEFC's request and upon provision to BISYS of the necessary
information and/or documentation:
(A) Place holds on transactions in Shareholder accounts or
freeze assets in Shareholder accounts, as provided in the
Company's AML Program.
(B) Create documentation to provide a basis for law enforcement
authorities to trace illicit funds.
(C) Maintain all records or other documentation related to
Shareholder accounts and transactions therein that are
required to be prepared and maintained pursuant to the
Company's AML Program, and make the same available for
inspection by (i) the Company's AML Compliance Officer, (ii)
any auditor of the Company's AML Program or related
procedures, policies or controls that has been designated by
the Company in writing, or (iii) regulatory or law
enforcement authorities, and otherwise make said records or
other documents available at the direction of the Company's
AML Compliance Officer or Board.
-4-
(d) Legal Services.
(i) Assist, as reasonably requested by AEFC, with preparation and
distribution of Board materials for and conduct of the Company's
organizational Board meeting.
(ii) prepare and file with the SEC the semi-annual report for the Funds on
Form N-SAR and N-CSR and all required notices pursuant to Rule 24f-2.
(e) Blue Sky Services. Upon receipt of appropriate information, prepare
such reports, applications and documents (including reports regarding the sale
and redemption of Shares as may be required in order to comply with Federal and
state securities laws) as may be necessary or desirable to register the Shares
with state securities authorities, monitor the sale of Shares for compliance
with state securities laws, and file with the appropriate state securities
authorities the registration statements and reports for the Company and the
Shares and all amendments thereto, as may be necessary or convenient to register
and keep effective the registration of the Company and the Shares with state
securities authorities to enable the Company to make a continuous offering of
its Shares.
(f) Special Reports and Services. BISYS may provide additional special
reports and such other similar services as may be reasonably requested by AEFC
or the Company, which may result in an additional charge, the amount of which
shall be agreed upon between the parties.
(g) Subcontracting. BISYS may at its expense subcontract with any entity or
person concerning the provision of services it provides hereunder; provided,
however, that BISYS shall not be relieved of any of its obligations under this
Agreement by the appointment of such sub-contractor and provided further, that
BISYS shall be responsible, to the extent provided in Article 6 hereof, for all
acts of such subcontractor as if such acts were its own including any payment
for services provided by sub-contractor.
2. Compensation
AEFC shall pay BISYS compensation for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in Schedule
A attached hereto.
3. Reimbursement of Expenses and Miscellaneous Service Fees
(a) In addition to paying BISYS the fees provided in Section 2 and Schedule
A, AEFC agrees to reimburse BISYS for its reasonable out-of-pocket expenses in
providing services hereunder, including without limitation the following:
(i) All freight and other delivery and bonding charges incurred by BISYS
in delivering materials to and from the Company or AEFC;
(ii) The cost of microfilm or microfiche of records or other materials;
-5-
(iii) All systems-related expenses associated with the provision of
special reports, interfaces and services;
(iv) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms,
proxies, notices or other forms of printed material (including
the costs of preparing and printing all printed materials)
which shall be required by BISYS for the performance of the
services to be provided hereunder;
(v) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with AEFC, the Company, dealers, public
accountants or others as required for BISYS to perform the
services to be provided hereunder;
(vi) Costs, if any, associated with record retention on behalf of
Company or AEFC;
(vii) Costs of fulfillment, if requested;
(viii) Costs of settlements;
(ix) Bank account charges;
(x) Travel and related expenses;
(xi) Any expenses BISYS shall incur at the written direction of an
officer or Trustee of the Company or AEFC (other than an
employee of BISYS) thereunto duly authorized; and
(xii) Any additional expenses reasonably incurred by BISYS in the
performance of its duties and obligations under this
Agreement, except as otherwise provided in this Agreement.
(b) In addition, BISYS shall be entitled to receive the following fees:
(i) Systems development fees billed at an hourly rate of $150 per hour,
as approved by the Company;
(ii) Fees for ad hoc or customized reports, billed at an agreed upon
rate; and
(iii) Fees for the development of custom interfaces, billed at a mutually
agreed upon rate.
4. Standard of Care; Uncontrollable Events; Limitation of Liability
BISYS shall use reasonable professional diligence to ensure the accuracy of
all services performed under this Agreement, but shall not be liable to AEFC or
the Company for any action taken or omitted by BISYS in the absence of bad
faith, willful
-6-
misfeasance, negligence or reckless disregard by it of its obligations and
duties. The duties of BISYS shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against BISYS
hereunder.
BISYS shall maintain adequate and reliable computer and other equipment
necessary or appropriate to carry out its obligations under this Agreement. Upon
AEFC's reasonable request, BISYS shall provide supplemental information
concerning the aspects of its disaster recovery and business continuity plan
that are relevant to the services provided hereunder. Notwithstanding the
foregoing or any other provision of this Agreement, BISYS assumes no
responsibility hereunder, and shall not be liable for, any damage, loss of data,
delay or any other loss whatsoever caused by events beyond its reasonable
control. Events beyond BISYS's reasonable control include, without limitation,
force majeure events. Force majeure events include natural disasters, actions or
decrees of governmental bodies, and communication lines failures that are not
the fault of either party. In the event of force majeure, computer or other
equipment failures or similar events beyond its reasonable control, BISYS shall
follow applicable procedures in its disaster recovery and business continuity
plan and use all commercially reasonable efforts to minimize any service
interruption.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL BISYS, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES, REGARDLESS OF WHETHER BISYS HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
5. Term
This Agreement shall become effective as of the date first written above
and shall continue in effect for three (3) years, until _______________, 2006
(the "Initial Term"). Thereafter, unless otherwise terminated as provided
herein, this Agreement shall be renewed automatically for successive one (1)
year periods ("Rollover Periods"). This Agreement may be terminated (i) by
provision of a notice of non-renewal at least ninety (90) days prior to the end
of the Initial Term or any Rollover Period, as the case may be, (ii) by mutual
agreement of the parties, or (iii) for "cause," as defined below, upon the
provision of sixty (60) days advance written notice by the party alleging cause.
For purposes of this Agreement, "cause" shall mean (a) a material breach of
this Agreement that has not been remedied for thirty (30) days following written
notice of such breach from the non-breaching party; (b) a final, unappealable
judicial, regulatory or administrative ruling or order in which the party to be
terminated has been found guilty of criminal or unethical behavior in the
conduct of its business; or (c) financial difficulties on the part of the party
to be terminated (or, in the case of termination by BISYS, the Company) which
are evidenced by the authorization or commencement of a voluntary, or failure to
diligently contest an involuntary, case under Title 11 of the United States
Code, as from time to time is in effect, or any applicable law, other than said
Title 11, of any jurisdiction relating to the liquidation or reorganization of
debtors or to the
-7-
modification or alteration of the rights of creditors. BISYS shall not terminate
this Agreement pursuant to clause (a) above based solely upon AEFC's failure to
pay an amount to BISYS which is the subject of a good faith dispute, if (i) AEFC
is attempting in good faith to resolve such dispute with as much expediency as
may be possible under the circumstances, and (ii) AEFC continues to perform its
obligations hereunder in all other material respects (including paying all fees
and expenses not subject to reasonable dispute hereunder).
Notwithstanding the foregoing, following any such termination, in the event
that BISYS in fact continues to perform any one or more of the services
contemplated by this Agreement (or any Schedule or exhibit hereto) with the
consent of AEFC or the Company, the provisions of this Agreement, including
without limitation the provisions dealing with indemnification, shall continue
in full force and effect. Fees and out-of-pocket expenses incurred by BISYS but
unpaid by AEFC upon such termination shall be immediately due and payable upon
and notwithstanding such termination. BISYS shall be entitled to collect from
the Company, in addition to the fees and disbursements provided by Sections 2
and 3 hereof, the amount of all of BISYS's cash disbursements in connection with
BISYS's activities in effecting such termination, including without limitation,
the delivery to AEFC, the Company, the Company's distributor or investment
advisor, and/or other parties of the Company's property, records, instruments
and documents.
If, for any reason other than (i) nonrenewal, (ii) mutual agreement of the
parties, or (iii) termination of BISYS for "cause" hereunder, BISYS's' services
are terminated hereunder, BISYS is replaced as sub-administrator or transfer
agent, or if a third party is added to perform all or a part of the services
provided by BISYS under this Agreement (excluding any sub-contractor appointed
as provided in Section 1(f) hereof), then AEFC shall make a one-time cash
payment, in consideration of the fee structure and services to be provided under
this Agreement, and not as a penalty, to BISYS equal to the balance that would
be due BISYS for its services hereunder during the lesser of (i) twelve (12)
months or (ii) the remainder of the term of this Agreement, assuming for
purposes of the calculation of the one-time payment that the fees that would be
earned by BISYS for each month shall be based upon the average assets, and
corresponding fees payable to BISYS, during the twelve (12) months prior to the
date that services terminate, BISYS is replaced or a third party is added.
In the event the Company is merged into another legal entity in part or in
whole pursuant to any form of business reorganization or is liquidated in part
or in whole prior to the expiration of the then-current term of this Agreement,
the parties acknowledge and agree that the liquidated damages provision set
forth above shall be applicable in those instances in which BISYS is not
retained to provide fund accounting and administration services consistent with
this Agreement. The one-time cash payment referenced above shall be due and
payable on the day prior to the first day in which services are terminated,
BISYS is replaced or a third party is added.
The parties further acknowledge and agree that, in the event services are
terminated, BISYS is replaced, or a third party is added, as set forth above,
(i) a
-8-
determination of actual damages incurred by BISYS would be extremely difficult,
and (ii) the liquidated damages provision contained herein is intended to
adequately compensate BISYS for damages incurred and is not intended to
constitute any form of penalty.
6. Indemnification
AEFC agrees to indemnify and hold harmless BISYS, its affiliates, and their
respective employees, agents, directors, officers and nominees from and against
any and all claims, demands, actions and suits, and from and against any and all
judgments, liabilities, losses, damages, costs, charges, counsel fees and other
expenses of every nature and character ("Losses") arising out of or in any way
relating to BISYS's actions taken or omissions with respect to the performance
of services under this Agreement or based, if applicable, upon reasonable
reliance on information, records, instructions or requests given or made to
BISYS by the Company, AEFC, the Company's custodian or auditor, or any other
authorized service provider; provided that this indemnification shall not apply
to actions or omissions of BISYS in cases of its own bad faith, willful
misfeasance, negligence or reckless disregard by it of its obligations and
duties.
BISYS shall indemnify, defend, and hold AEFC and the Company and their
respective employees, agents, trustees, directors, officers and nominees
harmless from and against any and all Losses resulting directly and proximately
from BISYS's willful misfeasance, bad faith or negligence in the performance of
its duties, or by reason of reckless disregard of its obligations and duties
hereunder.
The indemnification rights hereunder shall include the right to reasonable
advances of defense expenses in the event of any pending or threatened
litigation with respect to which indemnification hereunder may ultimately be
merited. In order that the indemnification provisions contained herein shall
apply, however, it is understood that if in any case a party may be asked to
indemnify or hold the other party harmless, the indemnifying party shall be
fully and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the indemnified party will use all
reasonable care to identify and notify the indemnifying party promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the indemnifying party,
but failure to do so in good faith shall not affect the rights hereunder except
to the extent the indemnifying party is materially prejudiced thereby. The
indemnified party shall not settle or compromise any claim or action for which
indemnity may be sought without the consent of the indemnifying party.
The indemnifying party shall be entitled to participate at its own expense
or, if it so elects, to assume the defense of any suit brought to enforce any
claims subject to this indemnity provision. If the indemnifying party elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by it and reasonably satisfactory to the indemnified party, whose
approval shall not be unreasonably withheld. In the event that the indemnifying
party elects to assume the defense of any suit and retain counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it. If the indemnifying party does not elect to assume the defense
of suit, it
-9-
will reimburse the indemnified party for the reasonable fees and expenses of any
counsel retained by the indemnified party. The indemnifying party shall not
settle or compromise any claim or action without the consent of the indemnified
party if it imposes liability, fault, any restriction or continuing obligation,
or other consequence on the indemnified party. The indemnity and defense
provisions set forth herein shall indefinitely survive the termination of this
Agreement.
7. Record Retention and Confidentiality
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company and BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the 1940 Act, relating to the maintenance
of books and records in connection with the services to be provided hereunder.
Any records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by BISYS on behalf of
the Company shall be prepared and maintained at the expense of BISYS, but shall
be the property of the Company and will be surrendered promptly to AEFC or the
Company upon their request, and made available for inspection by AEFC, the
Company or by the Securities and Exchange Commission at reasonable times.
In case of any request or demand for the inspection of such records by
another party, BISYS shall notify AEFC and follow AEFC's instructions as to
permitting or refusing such inspection; provided that BISYS may exhibit such
records in any case where (i) disclosure is required by law or legal process,
(ii) BISYS is advised by counsel that it may incur liability for failure to make
a disclosure, (iii) BISYS is requested to divulge such information by
duly-constituted authorities or regulatory process, or (iv) BISYS is requested
to make a disclosure by AEFC or the Company. BISYS shall provide the Company
with reasonable advance notice of disclosure pursuant to items (i) - (iii) of
the previous sentence, to the extent reasonably practicable.
8. Activities of BISYS
The services of BISYS rendered to AEFC and the Company hereunder are not to
be deemed exclusive. BISYS is free to render such services to others and to have
other businesses and interests. It is understood that trustees, officers,
employees and Shareholders the Company are or may be or become interested in
BISYS, as officers, employees or otherwise and that partners, officers and
employees of BISYS and its counsel are or may be or become similarly interested
in the Company as a Shareholder or otherwise.
9. Reports
BISYS shall furnish to AEFC and/or the Company and to the Company's
properly authorized auditors, investment advisors, examiners, distributors,
dealers, underwriters, salesmen, insurance companies and others designated by
AEFC or the Company in writing, such reports and at such times as are prescribed
pursuant to the terms and the
-10-
conditions of this Agreement to be provided or completed by BISYS, or as
subsequently agreed upon by the parties pursuant to an amendment hereto. AEFC
agrees to examine or to cause the Company to examine each such report or copy
promptly and will report or cause to be reported any errors or discrepancies
therein. In the event that errors or discrepancies, except such errors and
discrepancies as may not reasonably be expected to be discovered by the
recipient after conducting a diligent examination, are not so reported promptly,
a report will for all purposes be accepted by and binding upon the Company and
any other recipient, and BISYS shall have no liability for errors or
discrepancies therein and shall have no further responsibility with respect to
such report.
10. Rights of Ownership; Return of Records
All computer programs and procedures employed or developed by or on behalf
of BISYS to perform services required to be provided by BISYS under this
Agreement are the property of BISYS. All records and other data except such
computer programs and procedures are the exclusive property of the Company.
BISYS may at its option at any time, and shall promptly upon AEFC's or the
Company's demand or termination of this Agreement, deliver in appropriate form
to AEFC or the Company and cease to retain BISYS's files, records and documents
created and maintained by BISYS pursuant to this Agreement which are no longer
needed by BISYS in the performance of its services or for its legal protection.
If not so delivered, such documents and records will be retained by BISYS for
six years from the year of creation. At the end of such six-year period, such
records and documents will be turned over to AEFC or the Company unless AEFC or
the Company authorizes in writing the destruction of such records and documents.
11. Bank Accounts
AEFC shall or shall cause the Company to establish and maintain such bank
accounts with such bank or banks as are selected by AEFC or the Company, as are
necessary in order that BISYS may perform the services required to be performed
hereunder. BISYS may establish bank accounts for the Company upon request from
AEFC or the Company. The Company shall be deemed the customer of the relevant
bank for all purposes, including those established by BISYS. To the extent that
the performance of such services shall require BISYS directly to disburse
amounts for payment of dividends, redemption proceeds or other purposes, AEFC
shall or shall cause the Company to provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
12. Representations and Warranties
(a) The Company represents and warrants that: (i) as of the close of
business on the effective date of this Agreement, the Company has authorized
unlimited Interests, or a sufficient number of Interests to include all
Interests issued and outstanding, (ii) it is has all necessary power and
authority from the Company to and is authorized by the Company to engage BISYS
to perform the services provided herein to the Company, (iii) entering into this
Agreement does not conflict with any AEFC's or he Company's governing documents
or any contract by which it is bound, including the Administrative
-11-
Services Agreement between the Company and AEFC, and (iv) this Agreement has
been duly authorized by AEFC and, when executed and delivered by AEFC, will
constitute a legal, valid and binding obligation of AEFC, enforceable against
AEFC in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
(b) BISYS represents and warrants that: (i) the various procedures and
systems which BISYS has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Company and BISYS's records, data, equipment facilities and other
property used in the performance of its obligations hereunder are adequate and
that it will make such changes therein from time to time as are reasonably
required for the secure performance of its obligations hereunder, and (ii) this
Agreement has been duly authorized by BISYS and, when executed and delivered by
BISYS, will constitute a legal, valid and binding obligation of BISYS,
enforceable against BISYS in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
13. Insurance
BISYS shall maintain a fidelity bond covering larceny and embezzlement and
an insurance policy with respect to directors and officers errors and omissions
coverage in amounts that are appropriate in light of its duties and
responsibilities hereunder. Upon the request of AEFC, BISYS shall provide
evidence that coverage is in place. BISYS shall notify AEFC should its insurance
coverage with respect to professional liability or errors and omissions coverage
be canceled. Such notification shall include the date of cancellation and the
reasons therefore. BISYS shall notify AEFC of any material claims against it
with respect to services performed under this Agreement, whether or not they may
be covered by insurance, and shall notify AEFC should the total outstanding
claims made by BISYS under its insurance coverage materially impair, or threaten
to materially impair, the adequacy of its coverage.
14. Information Furnished by AEFC
(a) AEFC has furnished to BISYS the following, as amended and current as of
the effective date of this Agreement:
(i) Copies of the Company's Declaration of Trust and By-laws and of any
amendments thereto, in each case certified by an officer of the
Company.
(ii) Certified copies of resolutions of AEFC covering the following
matters:
(A) Approval of this Agreement and authorization of a specified
officer of AEFC to execute and deliver this Agreement; and
(B) Authorization of BISYS to act as transfer agent and
sub-administrator for the Company.
-12-
(iii) The Valuation Procedures adopted by the Company.
(iv) A list of all officers of AEFC and the Company and any other
persons (who may be associated with AEFC or the Company),
together with specimen signatures of those officers and other
persons, who are authorized to instruct BISYS in all matters.
(v) Two copies of the Prospectus of the Company.
(vi) The Administrative Services Agreement between the Company and
AEFC.
(vii) A copy of the Company's AML Program and any amendments
thereto.
(viii) A copy of the Company's and AEFC's Privacy Policy and any
amendments thereto.
(b) AEFC shall furnish BISYS written copies of any amendments to, or
changes in, any of the items referred to in this Section 14 forthwith upon such
amendments or changes becoming effective. In addition, AEFC agrees that no
amendments will be made to any of the foregoing, including the Declaration of
Trust, By-laws and Prospectus of the Company, that might have the effect of
changing the procedures employed by BISYS in providing the services agreed to
hereunder or which amendment might affect the duties of BISYS hereunder unless
AEFC first obtains BISYS's approval of such amendments or changes, which
approval shall not be withheld unreasonably.
15. Legal Advice; Reliance on Prospectus and Instructions
(a) BISYS may apply to AEFC or the Company at any time for instructions and
may consult with counsel or auditors to the Company with regard to BISYS's
responsibilities and duties pursuant to this Agreement. BISYS may rely upon the
advice of counsel or auditors to the Company or any other counsel or expert
authorized by AEFC or the Company, and shall in no event be liable to AEFC, the
Company or Shareholder for any action reasonably taken pursuant to such advice.
(b) As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Declaration of Trust and/or Prospectus of the
Company to the extent that such services are described therein, as well as the
minutes of Board meetings (if applicable) and other records of the Company
unless BISYS receives written instructions to the contrary in a timely manner
from AEFC or the Company.
As to any matter covered by the Administrative Services Agreement,
BISYS shall be authorized to act upon any instructions provided to it by AEFC
that are not clearly inconsistent with the terms of this Agreement. Also, BISYS
shall be protected in acting upon any document, which it reasonably believes to
be genuine and to have been signed or presented by the proper person or persons.
BISYS will not be held to have notice of any change of AEFC's authority, or any
change of authority of any officers, employees or
-13-
agents of the Company or AEFC until receipt of written notice thereof from the
Company or AEFC.
AEFC acknowledges and agrees that deviations from BISYS's written transfer
agent compliance procedures may involve a substantial risk of loss. In the event
an authorized representative of the AEFC or the Company requests that an
exception be made from any written compliance or transfer agency procedures
adopted by BISYS, BISYS may in its sole discretion determine whether to permit
such exception. In the event BISYS determines to permit such exception, it shall
become effective when set forth in a written instrument executed by an
authorized representative of AEFC or the Company (other than an employee of
BISYS) and delivered to BISYS (an "Exception"); provided that an Exception
concerning the requirements of the Company's AML Program shall be authorized by
the Company's AML Compliance Officer. An Exception shall be deemed to remain
effective until the relevant instrument expires according to its terms (or if no
expiration date is stated, until BISYS receives written notice from AEFC or the
Company, as the case may be, that such instrument has been terminated and the
Exception is no longer in effect). Notwithstanding any provision in this
Agreement that expressly or by implication provides to the contrary, as long as
BISYS acts in good faith and without willful misconduct, BISYS shall have no
liability for any loss, liability, expenses or damages to AEFC, the Company or
any Shareholder resulting from the Exception, and AEFC shall indemnify BISYS and
hold BISYS harmless from any loss, liability, expenses (including reasonable
attorneys fees) and damages resulting to BISYS therefrom.
16. Compliance with Law
AEFC assumes full responsibility for the preparation, contents and
distribution of each Prospectus of the Company and, except for the obligations
of BISYS set forth in Section 7 hereof, compliance with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and the 1940 Act. Except as expressly provided herein, AEFC and the Company
shall be solely responsible for their compliance with the Securities Act, the
1940 Act and any other laws, rules and regulations of governmental authorities
having jurisdiction over AEFC or the Company. BISYS shall have no obligation to
take cognizance of any laws relating to the sale of Shares. BISYS will comply
with all laws applicable to BISYS in connection with the rendering of services
under this Agreement.
AEFC acknowledges that each of it and the Company is a financial
institution subject to the law entitled United and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
("U.S.A. Patriot") Act of 2001 and the Bank Secrecy Act (collectively, the "AML
Acts") and shall comply, and cause the Company to comply, with the AML Acts and
applicable regulations adopted thereunder ( collectively, the "Applicable AML
Laws") in all relevant respects.
BISYS shall at all times comply with, the Act on behalf of BISYS. To the
extent prudent or necessary in order to comply with the Act, BISYS shall be
entitled, to refuse, in good faith, to process transactions on behalf of the
Company and Shareholders. AEFC
-14-
agrees to promptly provide to BISYS upon request copies of records and other
documentation evidencing compliance by AEFC and the Company with the Act, and
otherwise to assist BISYS in complying with its obligations under the Act.
17. Notices
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such notice
at the following address: if to AEFC, to American Express Financial Corporation,
50611 AXP Financial Center, Xxxxxxxxxxx, XX 00000; if to the Company, to
Advisory Hedged Opportunity Fund, 50611 AXP Financial Center, Xxxxxxxxxxx, XX
00000, Attn: __________; and if to BISYS, to it at BISYS Fund Services Ohio,
Inc., 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000; Attn: President, or at such other
address as such party may from time to time specify in writing to the other
party pursuant to this Section.
18. Assignment
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
19. Governing Law
This Agreement shall be governed by and provisions shall be construed in
accordance with the laws of the State of Ohio, subject to any applicable
provisions of the 1940 Act or the Securities Act.
20. Privacy
Nonpublic personal financial information relating to consumers or customers
of the Company provided by, or at the direction of AEFC or the Company to BISYS,
or collected or retained by BISYS to perform its duties shall be considered
confidential information. BISYS shall not give, sell or in any way transfer such
confidential information to any person or entity, other than affiliates of BISYS
except at the direction of AEFC or the Company or as required or permitted by
law. BISYS shall have in place and maintain physical, electronic and procedural
safeguards reasonably designed to protect the security, confidentiality and
integrity of, and to prevent unauthorized access to or use of records and
information relating to consumers or customers of the Company. AEFC represents
to BISYS that it and the Company have each adopted a statement of its privacy
policies and practices as required by the Securities and Exchange Commission's
Regulation S-P and agrees to provide BISYS with a copy of those statements
annually.
21. Miscellaneous
(a) Paragraph headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
-15-
(b) This Agreement constitutes the complete agreement of the parties hereto
as to the subject matter covered by this Agreement, and supercedes all prior
negotiations, understandings and agreements bearing upon the subject matter
covered herein.
(c) This Agreement may be executed in counterparts, each of which shall be
an original but all of which, taken together, shall constitute one and the same
agreement.
(d) No amendment to this Agreement shall be valid unless made in writing
and executed by both parties hereto. The parties hereto may amend such
procedures as may be set forth herein by written agreement as may be appropriate
or practical under the circumstances, and BISYS may conclusively assume that any
special procedure which has been approved by an authorized officer of AEFC or
the Company (other than an officer or employee of BISYS) does not conflict with
or violate any requirements of the Company's Declaration of Trust, By-laws, or
then-current Prospectus, or any rule, regulation or requirement of any
regulatory body.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
AMERICAN EXPRESS FINANCIAL
CORPORATION
By:
----------------------------------------
Name:
Title:
BISYS FUND SERVICES OHIO, INC.
By:
----------------------------------------
Name:
Title:
-16-
SCHEDULE A
TO THE ADMINISTRATION, ACCOUNTING
AND INVESTOR SERVICES AGREEMENT
BETWEEN AMERICAN EXPRESS FINANCIAL CORPORATION
AND BISYS FUND SERVICES OHIO, INC.
Fee
On the first $250,000,000 7 bps
On assets in excess of $250,000,000 5 bps
Fees are applied as an annual rate based on average net assets to the respective
asset levels indicated above, and are subject to a minimum annual fee of
$125,000 (not including out-of-pocket and miscellaneous service fees). Fees are
billed monthly and payment is due within 30 days or receipt.
Fee calculation example:
Average net assets = $350,000,000
250,000,000 x 0.007 = 1,750,000
100,000,000 x 0.005 = 500,000
1,750,000 + 500,000/12 = $187,500 total fee billed for the month.
Out-of-pocket Expenses and Miscellaneous Service Fees
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the fees and expenses set forth in
Section 3 of this Agreement to which this Schedule A is attached.
-17-
