OPERATIONS MONITORING AGREEMENT
AGREEMENT dated as of August 15, 2003 by and between FFTW FUNDS, INC.,
a Maryland corporation (the "Fund"), and EOS FUND SERVICES LLC, a Delaware
limited liability company ("EOS").
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and offers shares of separate series of its common stock, which have been
registered under the Securities Act of 1933, as amended;
WHEREAS, EOS is a service company which provides third-party global
fund administration oversight and consulting services to a select group of
institutional investment management firms, assisting its clients in managing all
aspects of their registered and unregistered fund businesses (apart from
portfolio management and asset gathering); and
WHEREAS, the Fund desires to retain EOS to render certain management
and administration services, including supervision of certain third party
vendors to the Fund.
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration the parties hereto, intending to be legally
bound hereby, agree as follows:
1. APPOINTMENT OF OPERATIONS MONITORING AGENT
The Fund hereby appoints EOS to act as operations monitoring agent to
the Fund for the period and on the terms set forth in this Agreement. This
appointment applies to each existing series of the Fund, as well as any future
series provided (i) the Fund does not object in writing to EOS serving such role
with respect to one or more of the series, or (ii) EOS does not object to the
Fund in writing on the basis of the capabilities of EOS. EOS accepts such
appointment and agrees to render the services and provide, at its own expense,
the office space, furnishings and equipment, and the personnel required by it to
perform the services on the terms and for the compensation herein provided.
As further delineated on Schedule A of this Agreement, which may be
amended by the parties from time to time, EOS shall provide for, or assist in
managing and supervising all aspects of, the general day-to-day business
activities and operations of the Fund except for investment advisory services,
including custodial, transfer agency, dividend disbursing, accounting, auditing
and legal services and asset gathering, EOS shall discharge such
responsibilities subject to the supervision and direction of the Fund's officers
and Board of Directors, and in compliance with the objectives, policies and
limitations set forth in the Fund's registration statement, Articles of
Incorporation, Bylaws and applicable laws and regulations. All agreements with
third parties shall be subject to review and approval by the Fund's executive
officers or Board of Directors.
2. REPRESENTATION AND WARRANTIES OF EOS
EOS represents and warrants to the Fund that:
A. EOS is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full power
and authority, corporate and otherwise, to consummate the transactions
contemplated by this Agreement. EOS is duly qualified to carry out its business,
and is in good standing, in the State of New York.
B. The Managing Members of EOS have taken all action required by law
and EOS' Articles of Organization and Operating Agreement to authorize the
execution and delivery of this Agreement by EOS and the consummation on behalf
of EOS of the transactions contemplated by this Agreement. This Agreement
constitutes a legal, valid and binding obligation of EOS enforceable in
accordance with its terms. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will result in a
breach of, or constitute a default under, or with lapse of time or giving of
notice or both will result in a breach of or constitute a default under, or
otherwise give any party thereto the right to terminate (a) any mortgage,
indenture, loan or credit agreement or any other agreement or instrument
evidencing indebtedness for money borrowed to which EOS is a party or by which
EOS or any of its properties is bound or affected, or pursuant to which EOS has
guaranteed the indebtedness of any person, or (b) any lease, license, contract
or other agreement to which EOS is a party or by which EOS or any of its
properties is bound or affected. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
result in, or require, the creation or imposition of any mortgage, deed or
trust, pledge, lien, security interest, or other charge or encumbrance of any
nature upon or with respect to any of the properties now or hereafter owned by
EOS.
C. Neither the execution nor delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will violate any provision
of the Articles of Organization or Operating Agreement of EOS.
D. Except such as have been obtained and as are in full force and
effect and subject to no dispute, claim or challenge, no permit, license,
franchise, approval, authorization, qualification or consent of, registration or
filing with, or notice to, any governmental authority is required in connection
with the execution and delivery by EOS of this Agreement or in connection with
the consummation by EOS of any transactions contemplated by this Agreement, and
no such permit, license, franchise, approval, authorization, qualification or
consent of, registration or filing with, or notice to any federal, state or
local governmental authority is required in connection with EOS' business or
operations as currently conducted or as currently contemplated to be conducted.
EOS has conducted its business and operations in compliance with all applicable
laws and regulations.
3. DUTIES OF THE FUND
A. The Fund will deliver to EOS copies of each of the following
documents and will deliver to EOS all future amendments and supplements, if any:
(1) A copy of the Articles of Incorporation of the Fund as
amended and currently in effect;
(2) A copy of the Fund's Bylaws as amended and currently in
effect;
(3) A copy of the resolutions of the Fund's Board of Directors
authorizing this Agreement;
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(4) The Fund's registration statement on Form N-1A as filed
with, and declared effective by, the U.S. Securities and Exchange Commission
("SEC"), and all amendments thereto;
(5) Each resolution of the Board of Directors of the Fund
authorizing the original issue of its shares;
(6) Copies of the resolutions of the Fund's Board of Directors
authorizing: (i) certain officers and employees of EOS to give instructions to
the Fund's custodian and transfer agent as required by agreements with such
parties, and (ii) certain officers and employees of EOS to sign checks and pay
expenses on behalf of the Fund;
(7) A copy of the current Investment Advisory Agreement between the
Fund and Xxxxxxx Xxxxxxx Trees & Xxxxx, Inc.;
(8) A copy of the Custodian Agreement and Transfer Agency Agreement
relating to the Fund;
(9) A copy of the current Administration Agreement between the Fund
and Investors Capital Services, Inc. ("ICS");
(10) A copy of the Distribution Agreement relating to the Fund; and
(11) Such other certificates, documents or opinions that EOS may, in
its reasonable discretion, deem necessary or appropriate in the proper
performance of its duties.
B. The Fund will cooperate in providing EOS with all necessary
information to permit EOS to perform its duties hereunder and will instruct ICS
to cooperate with EOS in connection therewith.
4. SERVICES TO BE OBTAINED INDEPENDENTLY BY THE FUND
The Fund shall, at its own expense, provide for any of its own:
A. Organizational expenses;
B. Services of an independent accountant;
C. Services of outside legal counsel (including such counsel's review
of the Fund's registration statement, proxy materials and other reports and
materials prepared or reviewed by EOS under this Agreement);
D. Services contracted for by the Fund directly from parties other
than EOS acting as administrator (or subcontracted for by EOS on behalf of the
Fund, subject to review and approval by the Fund's executive officers or Board
of Directors);
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E. Trading operations and brokerage fees, commissions and transfer
taxes in connection with the purchase and sale of securities for its investment
portfolio;
F. Investment advisory services;
G. Taxes, insurance premiums and other fees and expenses applicable to
its operation;
H. Costs incidental to any meeting of shareholders including, but not
limited to, legal and accounting fees, proxy filing fees and costs incidental to
the preparation, printing and mailing of any proxy materials;
I. Cost incidental to Directors' meetings, including fees and expenses
of Directors;
J. The salary and expenses of any officer or employee of the Fund who
is not also an officer or employee of EOS;
K. Custodian and depository banks and all services related thereto;
L. Costs incidental to the preparation, printing and distribution of
its registration statement and any amendments thereto, and shareholder reports,
including printing setup, printing and mailing costs;
M. All registration fees and filing fees required under the securities
laws of the United States and state regulatory authorities;
N. Fidelity bond and Director's and Officers' liability insurance;
O. Record retention costs of third parties;
P. Distribution fees pursuant to any distribution plan, if and when
adopted pursuant to Rule 12b-1 under the 1940 Act; and
Q. Litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business.
5. PRICE, CHARGES AND INSTRUCTIONS
In consideration of the services rendered and expenses assumed by EOS
pursuant to this Agreement, the Fund shall pay EOS as set forth in Schedule B
hereto.
In addition, EOS shall be reimbursed for the reasonable cost of any and
all forms, including blank checks and proxies, used by it in communicating with
shareholders, the Fund's Board of Directors, Fund management, or any regulatory
agencies on behalf of the Fund, or especially prepared for use in connection
with its obligations hereunder, as well as the reasonable cost of postage,
telephone, telex and telecopy used in communicating with shareholders, the
Fund's Board of Directors, Fund management, or
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any regulatory agencies on behalf of the Fund, travel-related expenses when
incurred on official Fund business and microfilm used each year to record the
previous year's transactions in shareholder accounts and computer tapes used for
reasonable permanent storage of records, permanent storage costs for hard copy
Fund records and reasonable cost of insertion of materials in mailing envelopes
by outside firms. Prior to ordering any forms in such supply as it estimates
will be adequate for more than two years' use, EOS shall obtain the written
consent of the Fund. All forms for which EOS has received reimbursement from the
Fund shall be and remain the property of the Fund until used.
At any time EOS may apply to any officer of the Fund or officer of the
Fund's investment adviser for instructions, and may consult with legal counsel
or auditors for the Fund, if consented to by an officer of the Fund or such
Fund's investment advisor, at the expense of the Fund, with respect to any
matter arising in connection with the services to be performed by EOS under this
Agreement and EOS shall not be liable and shall be indemnified by the Fund for
any action taken or omitted by it in good faith in reliance upon such
instructions or upon the opinion of such counsel. EOS shall be protected and
indemnified in acting upon any paper or document of the Fund reasonably believed
by it to be genuine and to have been signed by the proper person or persons and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. EOS shall also be protected and
indemnified, except where a stop order is in effect, in recognizing transfer
documents which EOS reasonably believes to bear the proper manual or facsimile
signature of the officers of the Fund, and the proper counter-signatures of any
present or former transfer agent.
6. LIMITATION OF LIABILITY AND INDEMNIFICATION
A. EOS shall provide its services in a professional manner customarily
provided by leading mutual fund administration companies. EOS shall be
responsible for the performance of only such duties as are set forth or
contemplated herein or contained in instructions given to it by the Fund that
are not contrary to this Agreement. EOS shall have no liability for any loss or
damage resulting from the performance or non-performance of its duties hereunder
unless caused by or resulting from the negligence, bad faith, or misconduct of
EOS, its officers or employees or the negligent or willful violation by any of
such persons of this Agreement. In any event, EOS shall not be liable for any
consequential damages, except to the extent resulting from its gross negligence
or willful misconduct.
B. The Fund shall indemnify and hold EOS harmless from all loss, cost,
damage and expense, including reasonable expenses for counsel, incurred by it
resulting from any claim, demand, action or suit in connection with any action
or omission by it in the performance of its duties hereunder, or as a result of
acting upon any instructions reasonably believed by it to have been executed by
a duly authorized officer of the Fund (the "Fund Indemnification"), provided
that this indemnification shall not apply to actions or omissions of EOS, its
officers or employees, and EOS shall similarly indemnify and hold the Fund
harmless, in cases of its or their own negligence or misconduct or the violation
by any of such persons of this Agreement (the "EOS Indemnification"). The Fund
Indemnification and the EOS Indemnification shall survive any termination of
this Agreement.
C. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the Fund Indemnification, and if the Fund
elects to assume the defense, such defense shall be conducted by
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counsel chosen by the Fund, and EOS or any of its affiliated persons named as
defendant or defendants in the suit may not retain additional counsel unless the
Fund shall have specifically authorized the retaining of such counsel. In the
event of any claim by the Fund under the EOS Indemnification, the Fund agrees to
promptly notify EOS of such claim, and EOS have the right to defend or settle
such claim at its own expense and by counsel of its own selection.
7. CONFIDENTIALITY
EOS agrees that, except as otherwise required by law, EOS will keep
confidential all records and information in its possession relating to the Fund
or its shareholders or shareholder accounts and will not disclose the same to
any person except at the request or with the written consent of the Fund.
8. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS
The Fund assumes full responsibility for complying with all applicable
requirements of the Securities Act of 1933, the 1940 Act and the Securities
Exchange Act of 1934, all as amended, and any laws, rules and regulations of
governmental authorities having jurisdiction, except to the extent that EOS
specifically assumes any such obligations under the terms of this Agreement.
EOS shall maintain and preserve for the period prescribed, such records
relating to the services to be performed by EOS under this Agreement as are
required pursuant to the 1940 Act and the Securities Exchange Act of 1934. All
such records shall at all times remain the respective properties of the Fund,
shall be readily accessible during normal business hours and shall be promptly
surrendered upon the termination of this Agreement or otherwise on written
request. Records shall be surrendered in usable machine-readable form.
9. STATUS OF EOS
EOS shall be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Fund from time to time,
have no authority to act or represent the Fund in any way or otherwise be deemed
an agent of the Fund.
Nothing herein shall be deemed to limit or restrict EOS' right or that
of any of its affiliates or employees, to engage in any other business or to
devote time and attention to the administration or other related aspects of any
other registered investment company or to render services of any kind to any
other corporation, firm, individual or association.
10. PRINTED MATTER CONCERNING THE FUND OR EOS
Neither the Fund nor EOS shall publish and circulate any printed matter
which contains any reference to the other party without its prior written
approval, except as may be required by applicable laws or regulations.
11. TERM, AMENDMENT AND TERMINATION
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The initial term of this Agreement shall continue through August 31,
2006 (the "Initial Term"), unless earlier terminated as provided herein. After
the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive one-year terms (each a "Renewal Term") unless
the non-renewing party delivers notice of non-renewal to the other party no
later than 90 days prior to the expiration of the Initial Term or any Renewal
Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term or during any Renewal Term in the event the
other party violates any material provision of this Agreement or fails to
generally perform in accordance with the minimum requirements for standard
industry practices or to reasonably perform in accordance with any material
provision of this Agreement, provided that the non-violating party or the party
seeking to impose such performance gives written notice of such violation or
failure to perform to the violating or non-performing party and the violating or
non-performing party does not cure such violation or failure to perform as soon
as reasonably practicable and, in any event, within 90 days of receipt of such
notice. Additionally, either party hereto may terminate this Agreement prior to
the expiration of the Initial Term or during any Renewal Term in the event the
Fund is liquidated or in any way changes its corporate structure.
(b) Any termination pursuant to this paragraph 11 shall be
effective upon expiration of such 90 days, provided, however, that the effective
date of such termination may be postponed to a date not more than 150 days after
delivery of the written notice: (i) at the request of EOS, in order to prepare
for the transfer by EOS of all records and other necessary materials; or (ii) at
the request of the Fund, in order to give the Fund an opportunity to make
suitable arrangements for a successor service company.
(c) In the event that Xxxxxxx X. Xxxxxxxxx, the President and
a Managing Member of EOS, shall for any reason of death, incapacitation,
incarceration, or personal decision be unavailable, unable, or unwilling to
continue to act as the primary manager or relinquish a majority ownership role
in the operations of EOS prior to the expiration of the Initial Term or during
any Renewal Term, the Fund shall have the option, exercisable in its sole and
absolute discretion within 30 days of notice, written or otherwise, of the
death, incapacitation, or incarceration of Xxxxxxx X. Xxxxxxxxx, or within 30
days of written notice by Xxxxxxx X. Xxxxxxxxx to the Fund of his personal
decision to cease acting as the primary manager or relinquish a majority
ownership role in the operations of EOS, to terminate this Agreement upon 90
days written notice to an officer or another Managing Member of EOS; provided,
however, that the failure of the Fund to exercise its option during the 30 day
option period shall cause this Agreement to continue in full force and effect
according to the terms and provisions hereof.
(d) In the event notice of termination is given to EOS by the
Fund under this paragraph 11, such notice shall be accompanied by a resolution
of the Board of Directors, certified by the Secretary, electing to terminate
this Agreement.
12. NOTICES
Any notice or other communication authorized or required hereunder
shall be in writing or by confirming telegram, cable, telex or facsimile sending
device. Notice shall be addressed (a) if to the
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Fund, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X.
Xxxxxxx, and (b) if to EOS, 000 Xxxx 00xx Xxxxxx, Xxxxx 00-X, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxxx X. Xxxxxxxxx. Either party may designate a different
address by notice to the other party. Any such notice or other communication
shall be deemed given when actually received.
13. NON-ASSIGNABILITY
This Agreement shall not be assigned by either of the parties hereto
without the prior consent in writing of the other party. Any purported
assignment in violation of this agreement shall be void and of no effect. For
purposes of this paragraph 13, the term "assignment" shall mean an assignment as
defined in the Investment Company Act of 1940.
14. SUCCESSORS
This Agreement shall be binding on and shall insure to the benefit of
the Fund and EOS, and their respective successors and permitted assigns.
15. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of the day and
year above written.
ATTEST: FFTW FUNDS, INC.
By: /s/ Xxxx Xxxxx By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxx Xxxxx Xxxxxxx X. Xxxxxx
President
ATTEST: EOS FUND SERVICES LLC
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------ -------------------------
Name: Xxxxxxx X. Xxxxxxxxx
President and Managing Member
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SCHEDULE A
TO
OPERATIONS MONITORING AGREEMENT
BETWEEN
FFTW FUNDS, INC.
AND
EOS FUND SERVICES LLC
Pursuant to the attached Operations Monitoring Agreement, EOS will
provide the following services to the FUND as well as such other services as may
be reasonably requested by the Fund or its Board of Directors or investment
advisor from time to time:
TREASURER'S OFFICE
o Coordination of audit/tax work among audit firm and vendors
o Review of financial statements (annual, semi-annual)
o Review of Forms N-SAR and N-CSR (annual, semi-annual)
o Certification of financials on Form N-CSR
o Review and execution of tax filings
o Provide individual(s) to serve as Treasurer, Assistant Treasurer, Secretary
and/or Assistant Secretary
o Provide individual(s) to serve as Anti-Money Laundering Officer
o Provide individual(s) to serve as Compliance Officer
o Coordination and documentation of Valuation Committee
o Review of expense budgets and accruals
o Negotiation and review of fidelity bond and E&O/D&O coverage proposals
VENDOR OVERSIGHT
o Selection of service providers
o Review of deliverables
o Review of vendor agreements
o Review of sub-advisory/partnership agreements
o Review of vendor invoices
o Review of engagement letters
o Negotiation of fees
o Input on business requirements for vendor systems development
o Review of vendor controls and procedures
o Review of monthly quality reports
OVERSIGHT OF FUND/SERIES/PRODUCT START-UPS AND TERMINATIONS
o Coordinate legal issues with in-house and outside counsel
o Coordinate tax and accounting issues with audit firm
o Coordinate operations with vendors
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o Review Prospectus, SAI and sticker
o Review proxy
o Review other offering documents
o Establish fund budget/expense reserve
BOARD COORDINATION
o Review Board materials
o Coordinate adviser presentations and materials
o Attend Board meetings
o Communicate with Board members, including coordination of meeting dates and
materials
o Coordinate responses to Directors' questionnaires
DATA INTEGRITY
o Review performance calculations
o Review daily data discrepancy
o Review proof packages from service providers
o Review reconciliations between service providers and adviser
CONSULTING SERVICES
o Regulatory issues
o Registration issues (including Blue Sky)
o Accounting issues
o Operations issues
o Product structures
o Establishing quality standards
o RFP preparation and coordination, and vendor review
o Security pricing issues
o Governance issues
o Regulatory audit coordination
o Internal control
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SCHEDULE B
TO
OPERATIONS MONITORING AGREEMENT
BETWEEN
FFTW FUNDS, INC.
AND
EOS FUND SERVICES LLC
In consideration of the services rendered and expenses assumed by EOS
pursuant to (i) this Operations Monitoring Agreement, (ii) that certain
Operations Monitoring Agreement effective as of August 15, 2003 between FFTW
Diversified Alpha Fund Ltd. and EOS and (iii) those certain Operations
Monitoring Agreements effective as of August 15, 2003 between EOS and each of
FFTW Mortgage Total Return Fund, plc and FFTW Global Debt Fund, plc, the FUND
shall pay EOS in arrears on the last business day of each month a pro-rated
monthly portion of an overall relationship fee at the annual rate of 0.02% of
the average daily net assets of the FFTW entities on the first $3.5 billion,
0.015% thereafter up to $5 billion, 0.01% thereafter up to $7.5 billion, 0.0075%
thereafter up to $10 billion, and 0.005% on assets over $10 billion.
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