EX-99.h.2
Execution Copy Optimum Funds
FUND ACCOUNTING AND FINANCIAL ADMINISTRATION
SERVICES AGREEMENT
THIS AGREEMENT is made as of the 1st day of October, 2007 (the "Effective
Date") by and between MELLON BANK, N.A. (referred to herein as "Mellon"), a
national banking association having its principal place of business at 000 Xxxxx
Xxxxxx, Xxxxxxxxxx, XX 00000, and each investment company listed on Schedule A
(referred to herein, individually, as a "Fund" and, collectively, as the
"Funds"), having its principal place of business at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxxxx, XX 00000.
WHEREAS, each Fund is registered with the Securities and Exchange
Commission ("SEC") as an investment company under the Investment Company Act of
1940 (the "1940 Act"), and is classified as an open-end management investment
company, unless otherwise noted;
WHEREAS, Mellon is engaged in the fund accounting and financial
administration services business; and
WHEREAS, each Fund desires that Mellon perform the fund accounting,
financial administration and related services described in this Agreement for
the Fund, and Mellon is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in exchange for good and valuable consideration, the
receipt and sufficiency of which are acknowledged, and intending to be legally
bound, each Fund and Mellon agree as follows:
1. Services
X. Xxxxxx shall perform for each Fund and its series (including all share
classes) listed in Schedule A to this Agreement, the fund accounting, financial
administration and related services set forth in Schedule B to this Agreement
("Services"). Mellon and a Fund may mutually agree to add or delete a Fund
series and/or class, which must be evidenced by amending Schedule A. Each
existing and future series of a Fund (including all share classes) covered by
this Agreement is individually and collectively referred to as a "Portfolio."
Mellon may perform other services for each Fund only upon terms, conditions and
compensation that Mellon and each Fund mutually agree to, as evidenced by an
amendment to this Agreement or Schedule X.
X. Xxxxxx may enter into additional agreements with each Fund or its
designated service provider from time to time with respect to: (i) certain
operational functions that Mellon will perform in connection with this
Agreement; and (ii) performance measures pursuant to which Mellon will be
expected to provide the Services (the "Service Level Documents"). The Service
Level Documents will be designed to provide operational guidance and performance
metrics information that may be used by each Fund and Mellon to assist in the
delivery of the Services and to measure Mellon's performance in providing the
Services. Each Fund and Mellon agree that the Service Level Documents will
reflect the division of operational functions between or among each Fund, its
agents and Mellon, and specific performance measures for
Mellon, rather than imposing specific contractual obligations under this
Agreement. Notwithstanding the foregoing, (i) Mellon's material and systemic
failure to perform its operational functions or to satisfy the performance
measures pursuant to the Service Level Documents may be considered a material
breach of the "For Cause" provisions described in Section 3.B of this Agreement;
(ii) the Service Level Documents may provide remedies for the failure to satisfy
the operational functions or performance measures contemplated thereunder that
are separate and apart from any right that each Fund or Mellon may exercise
under this Agreement; and (iii) Mellon's performance or non-performance of the
Services, separate and apart from the operational functions and performance
measures reflected in any Service Level Document, may give rise to any remedies
that each Fund may assert against Mellon under the terms of this Agreement.
X. Xxxxxx'x present intention is to utilize the Eagle STAR/PACE platform as
its fund accounting platform, with the understanding of the parties that Mellon
reserves the right to utilize other accounting platform(s) that allow(s) Mellon
to perform the Services at a quality and level equivalent to the quality and
level set forth in the Service Level Documents. Mellon shall be responsible for
the costs and expenses incurred by Mellon and the Funds for converting from the
Eagle STAR/PACE platform to other accounting platform(s) in accordance with this
subparagraph C.
2. Compensation and Expenses
A. In return for performing the Services, the Funds shall compensate Mellon
as set forth in this Section and in Schedule C to this Agreement. Fees due will
be accrued daily. If this Agreement is lawfully terminated before the end of any
month, fees shall be calculated on a pro rated basis through the date of
termination and shall be due upon the Agreement's termination date.
B. Each Fund will pay all of its own expenses that are incurred in the
Fund's operation and not specifically assumed by Mellon. Expenses to be borne by
each Fund include, but are not limited to: pricing, security and other similar
data information vendor services; organizational expenses; costs of services of
the Fund's independent registered public accounting firm ("Independent
Accountant") and the Fund's outside legal and tax counsel (including such
counsel's review of the Fund's registration statement, proxy materials, federal
and state tax qualification as a regulated investment company and any review of
reports and materials prepared by Mellon under this Agreement); costs of any
services contracted for by the Fund directly from parties other than Mellon;
trade association dues; costs of trading operations and brokerage fees,
commissions and transfer taxes in connection with the purchase and sale of
securities for the Fund; investment advisory fees; taxes; Fund insurance
premiums and other Fund insurance-related fees and expenses applicable to its
operation; costs incidental to any meetings of shareholders, including, but not
limited to, legal and auditor fees, proxy filing fees and the costs of printing
and mailing of any proxy materials; costs incidental to Fund board meetings,
including fees and expenses of Fund board members, but excluding costs
specifically assumed by Mellon; the salary and expenses of any officer,
director/trustee or employee of the Fund who is not also a Mellon employee;
registration fees, filing fees, and costs incidental to the preparation,
typesetting, printing and/or distribution, as applicable, of the Fund's
registration statements on Forms X-0X, X-0, X-0, X-0, X-0, and N-14, as
applicable, and any amendments
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thereto, shareholder reports on Form N-CSR, Form N-SARs, Form N-Q, Form N-PX,
tax returns, and all notices, registrations and amendments associated with
applicable federal and state tax and securities laws; and other expenses
properly payable by the Fund.
C. Each Fund agrees to reimburse Mellon for its actual out-of-pocket
expenses in providing the Services, including without limitation, the following:
(i) the electronic transmission expenses incurred by Mellon in
communicating with such Fund, such Fund's investment advisers (which term, for
purposes of this Agreement, shall be interpreted to include any sub-advisers) or
custodian, dealers or others as required for Mellon to perform the Services, if
an Authorized Person requests such electronic transmission and provides Mellon
with prior written approval;
(ii) the costs of creating microfilm, microfiche or electronic copies
of such Fund's records, and the costs of storage of paper and electronic copies
of such Fund's records; provided, that Mellon must obtain the prior written
approval of an Authorized Person if such costs for the Fund exceed $7,500 in any
calendar year;
(iii) the charges for services provided by vendors set forth in
Schedule D;
(iv) any additional expenses incurred by Mellon at the written
direction of an Authorized Person;
(v) any additional expenses reasonably incurred by Mellon in the
performance of the Services, provided that, (a) if any individual expense is
less than $1,000, Mellon shall provide prior written notice to such Fund to the
extent practicable, and (b) if any individual expense is $1,000 or more, Mellon
must obtain the prior written approval of an Authorized Person of the Fund; and
(vi) in the event that Mellon is requested or authorized by such Fund
or is required by law, summons, subpoena, investigation, examination or other
legal or regulatory process to produce documents or personnel with respect to
the Services, and so long as Mellon is not the subject of the investigation or
proceeding in question, such Fund will reimburse Mellon for its actual
out-of-pocket expenses (including reasonable attorneys' fees) incurred in
responding to these requests. In addition, when non-routine, extensive or
extraordinary productions or investigations occur, Mellon will notify such Fund
(as soon as reasonably practicable) and such Fund will reimburse Mellon for its
personnel's professional time (at Mellon's standard billing rates or other
mutually agreed upon rates).
X. Xxxxxx shall be entitled to receive the following amounts:
(i) Any systems development and project fees for new or enhanced
products or services requested by a Fund (including significant enhancements
required by regulatory changes), and all systems-related expenses associated
with the provision of special reports and services, in each case as agreed upon
in advance; and
(ii) Ad hoc reporting fees billed at an agreed upon rate.
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X. Xxxxxx will xxxx each Fund on a monthly basis for the fees and expenses
owed to Mellon by such Fund under this Agreement. The monthly xxxx shall be set
forth on a detailed invoice in a form mutually agreed upon by Mellon and the
Funds. Mellon shall send such invoice to each Fund no later than fifteen (15)
days after the last day of each month; provided, however, that the failure by
Mellon to do so shall not be considered a breach of this Agreement. Each Fund
shall pay such invoice within fifteen (15) days of receipt of such invoice by
such Fund. Any undisputed fees or expenses that are not paid by a Fund within
the required time frame shall be subject to a late fee of 1.5% of the amount
billed for each month that such fees or expenses remain unpaid, and the late fee
shall be due and payable upon demand. No Fund shall dispute the minimum fees set
forth in Schedule C. If any fees over and above the minimum fees set forth in
Schedule C or any expenses are disputed by a Fund, Mellon and such Fund shall
work together in good faith to resolve the dispute promptly.
X. Xxxxxx will assume responsibility for the costs of its ordinary and
necessary office facilities (including telephone, telephone transmission, and
telecopy expenses), equipment and personnel to perform the Services, including
the compensation of its employees who serve as Fund trustees, directors or
officers. In the event that Mellon is the subject of an examination, subpoena,
investigation, proceeding or legal or regulatory process relating to the
Services it provides to a Fund ("Mellon Services Inquiry"), and if Mellon
requests that the Fund provide, or if the Fund is required by law, summons,
subpoena, investigation, examination or other legal or regulatory process, to
produce documents or personnel with respect to the Services, then Mellon will
reimburse the Fund for its actual out-of-pocket expenses (including reasonable
attorneys' fees) incurred in responding to these requests. Furthermore, if the
Mellon Services Inquiry is non-routine, extensive or extraordinary, then Mellon
will reimburse the Fund for its personnel's professional time at mutually agreed
upon rates.
3. Length and Termination of Agreement
A. The term of this Agreement shall begin on the Effective Date and
continue for an initial term of seven (7) years (the "Initial Term"). Unless
otherwise terminated in accordance with its terms, Mellon shall either (i)
request that this Agreement be extended for an additional five (5) year period,
or (ii) indicate that this Agreement will be terminated upon the expiration of
the Initial Term or a Renewal Term (as the case may be), in either case by
sending a written notice of its intent to the Fund no later than three (3)
months prior to the fifth anniversary of the Effective Date of the Initial Term
or the third anniversary of the effective date of a Renewal Term (as the case
may be). If Mellon requests that this Agreement be extended for an additional
five (5) year period and the Fund does not reject such request in writing to
Mellon by the sixth anniversary of the Effective Date of the Initial Term or the
fourth anniversary of the effective date of a Renewal Term (as the case may be),
this Agreement shall be extended for an additional five (5) year period (a
"Renewal Term"). If either (a) Mellon indicates that this Agreement will be
terminated upon the expiration of the Initial Term or a Renewal Term (as the
case may be) by sending a written notice of its intent to the Fund no later than
three (3) months prior to the fifth anniversary of the Effective Date of the
Initial Term or the third anniversary of the effective date of a Renewal Term
(as the case may be), or (b) the Fund responds to Mellon's request to extend for
an additional five (5) year period by rejecting such request in writing to
Mellon no later than the sixth anniversary of the Effective Date of the Initial
Term or the fourth anniversary of the
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effective date of a Renewal Term (as the case may be), this Agreement shall
terminate upon the expiration of the Initial Term or such Renewal Term (as the
case may be).
B. This Agreement may be terminated by the following party or parties, as
the case may be, for one or more of the following reasons, provided the
terminating party provides the applicable written notice to the other party or
parties, as the case may be, of the reason for such termination:
(i) NonRenewal: Mellon or the Funds may decline to extend the terms of
this Agreement beyond the Initial Term under subparagraph A of this Section;
(ii) Mutual Agreement: Mellon and the Funds may mutually agree in
writing to terminate this Agreement at any time;
(iii) "For Cause": (a) Mellon may terminate this Agreement "For
Cause," as defined below, by providing the Funds with written notice of
termination "For Cause" at least 60 days prior to the date of termination of
this Agreement, or (b) a Fund may terminate this Agreement with respect to such
Fund "For Cause," as defined below, by providing Mellon with written notice of
termination "For Cause" at least 60 days prior to the date of termination of
this Agreement with respect to such Fund;
(iv) Failure to Pay: Mellon may terminate this Agreement if Mellon has
notified the Funds that they have failed to pay Mellon any undisputed amounts
when due under this Agreement and the Funds have failed to cure such default
within 30 days of receipt of such notice (or, if the Funds have disputed in good
faith any fees over and above the minimum fees set forth in Schedule C or any
expenses, upon final resolution of such dispute); or
(v) Termination of Custody Agreement: Mellon may terminate this
Agreement with respect to a Fund if such Fund terminates its custody agreement
with Mellon or any of its affiliates following either (a) a change in such
Fund's investment adviser (other than a change in such Fund's investment adviser
to another investment adviser that is under common ownership with such Fund's
investment adviser or its successor) or (b) a sale (whether by a merger or a
sale of the stock or assets) of such Fund's investment adviser (other than a
sale of such Fund's investment adviser to another entity that is under common
ownership with such Fund's investment adviser or its successor) or its parent
company, by providing such Fund with written notice of such termination at least
60 days prior to the date of termination of this Agreement with respect to such
Fund (which termination date will be extended by Mellon if, but only if and to
the same extent that, the date of termination of its custody agreement is
extended by such Fund). For purposes of this subparagraph (v) only, the term
"investment adviser" does not include any subadviser.
For purposes of subparagraph (iii) above, "For Cause" shall mean:
(a) a material breach of this Agreement by any other party or
parties, as the case may be, that has not been remedied for 30 days
following written notice by the terminating party that identifies in
reasonable detail the alleged failure of the other party or parties,
as the case may be, to perform, provided that if such default is
capable of being cured, then the other party or parties, as the
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case may be, are entitled to such longer period as may reasonably be
required to cure such default if the other party or parties, as the
case may be, have commenced such cure and is diligently pursuing same,
but such cure must be completed within 120 days in any event;
(b) when any other party or parties, as the case may be, commit
any act or omission that constitutes gross negligence, willful
misconduct, fraud or reckless disregard of its or their duties under
this Agreement and that act or omission results in material adverse
consequences to the terminating party;
(c) a final, unappealable judicial, regulatory or administrative
ruling or order in which any other party or parties, as the case may
be, have been found guilty of criminal or unethical behavior in the
conduct of its business that directly relates to the subject matter of
the Services; or
(d) when any other party or parties, as the case may be, shall
make a general assignment for the benefit of its or their creditors or
any proceeding shall be instituted by or against the other party or
parties, as the case may be, to adjudicate it or them as bankrupt or
insolvent, or to seek to liquidate, wind up, or reorganize the other
party or parties, as the case may be, or protect or relieve its or
their debts under any law, or to seek the entry of an order for relief
or the appointment of a receiver, trustee or other similar official
for it or them or for a substantial portion of its or their assets,
which proceeding shall remain unstayed for sixty (60) days or the
other party or parties, as the case may be, have taken steps to
authorize any of the above actions or has become unable to pay its or
their debts as they mature.
C. If this Agreement is terminated by any party (regardless of whether it
is terminated pursuant to paragraph B. above or for any reason other than those
specified in paragraph B. above), the Funds shall pay to Mellon on or before the
effective date of such termination any undisputed and unpaid fees owed to, and
shall reimburse Mellon for any undisputed and unpaid out-of-pocket costs and
expenses owed to, Mellon under this Agreement prior to its termination.
D. If either (i) the Funds terminate this Agreement during the Initial Term
for any reason other than those specified in paragraph B. above, or (ii) Mellon
terminates this Agreement during the Initial Term "For Cause" or the Funds'
"failure to pay" under subparagraphs B(iii) or B(iv) of this Section,
respectively, then the Funds shall make a one-time cash payment (a "Termination
Fee") to Mellon on the effective date of such termination in an amount equal to
(w) $1,000,000 if the effective date of the termination of this Agreement is in
the first two years of the Initial Term, (x) $800,000 if the effective date of
the termination of this Agreement is in the third year of the Initial Term, (y)
$500,000 if the effective date of the termination of this Agreement is in the
fourth year of the Initial Term, or (z) $300,000 if the effective date of the
termination of this Agreement is in the last three years of the Initial Term. In
addition, the Funds shall reimburse Mellon promptly for any actual, provable,
extraordinary, non-customary and direct costs and expenses (other than any Costs
and Expenses) incurred by Mellon in connection with effecting such termination
and converting the Funds to a successor service provider,
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including without limitation the delivery to such successor service provider,
the Funds and/or other Funds' service providers any of the Funds' property,
records, data, instruments and documents.
The parties acknowledge and agree that, upon the occurrence of any of such
events giving rise to a Termination Fee: (i) a determination of actual damages
incurred by Mellon would be extremely difficult, (ii) the Termination Fee is
intended to adequately compensate Mellon for damages incurred and is not
intended to constitute any form of penalty, and (iii) the Termination Fee is
intended to include the Costs and Expenses incurred by Mellon in connection with
effecting such termination and converting the Fund to a successor service
provider, including, without limitation, the delivery to such successor service
provider, the Fund and/or other Fund service providers any of the Fund's
property, records, data, instruments and documents. The parties further
acknowledge and agree that, upon the occurrence of a significant change in the
number of Funds or Portfolios during the Initial Term, they will discuss in good
faith a possible adjustment to the Termination Fee; provided, however, that no
party shall be obligated to agree to any such adjustment.
E. If either (i) Mellon terminates this Agreement with respect to a Fund at
any time for any reason other than those specified in paragraph B. above, or
(ii) a Fund terminates this Agreement with respect to such Fund at any time "For
Cause" under subparagraph B(iii) of this Section, then Mellon shall reimburse
such Fund for any Costs and Expenses incurred by such Fund in connection with
converting such Fund to a successor service provider, including without
limitation the delivery to such successor service provider, such Fund and/or
other Fund's service providers any of such Fund's property, records, data,
instruments and documents.
F. If this Agreement is terminated (i) by Mellon and/or the Funds, as the
case may be, at any time for "nonrenewal" or "upon mutual agreement" under
subparagraphs B(i) and B(ii), respectively, (ii) by Mellon at any time for
"termination of custody" under subparagraph B(v), (iii) by the Funds at any time
after the Initial Term for any reason other than those specified in paragraph B
above, or (iv) by Mellon at any time after the Initial Term "For Cause" or the
Funds' "failure to pay" under subparagraphs B(iii) or B(iv) of this Section,
respectively, the Funds shall reimburse Mellon promptly for any Costs and
Expenses incurred by Mellon in connection with effecting such termination and
converting the Funds to a successor service provider, including without
limitation the delivery to such successor service provider, the Funds and/or
other Funds' service providers any of the Funds' property, records, data,
instruments and documents.
G. For purposes of this Section 3, "Costs and Expenses" incurred by a party
shall mean any provable, reasonable, customary and direct costs and expenses
actually incurred by such party. For purposes of this Section 3, Costs and
Expenses shall not include any wind-down costs, including, without limitation,
non-cancelable lease payments; severance payments due and payable to personnel
of Mellon or its Subcontractors that were not engaged by Mellon at the
instruction of a Fund or the Funds; unused equipment expense; and non-cancelable
payments or termination charges regarding hosting and other subcontracting
services that were not incurred at the instruction of a Fund or the Funds and
that cannot be transferred or redeployed by Mellon. For purposes of this
Agreement, "Subcontractor" shall include any third party, whether affiliated or
unaffiliated with Mellon, engaged by Mellon in connection with the performance
of the
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Services. Such party must provide the other party with written evidence of such
costs and expenses before the other party is obligated to pay them. Such party
also has a duty to mitigate, and must exercise its duty to mitigate, such costs
and expenses. Except as expressly set forth in Sections 3 and 9 and Schedule C,
no party hereto shall be responsible for any costs and expenses or damages of
any kind whatsoever resulting from, related to or otherwise in connection with
the termination of this Agreement.
H. In the event that this Agreement is terminated by a party or the
parties, as the case may be, the parties hereto agree to cooperate and act in
good faith to ensure an orderly conversion of the applicable Fund or Funds to a
successor service provider with respect to the Services provided under this
Agreement. Without limiting the generality of the foregoing sentence, Mellon
agrees that, in the event this Agreement is terminated by a party or the
parties, it will deliver a Fund's or the Funds' property, records, data,
instruments and documents to such Fund or the Funds, its or their successor
service providers and/or its or their other service providers, as the case may
be, in a non-proprietary, commercially-available format.
I. The termination of this Agreement with respect to any given Fund or
Portfolio shall in no way affect the continued validity of this Agreement with
respect to any other Fund or Portfolio. Furthermore, if, following termination
of this Agreement with respect to any given Fund or Portfolio, Mellon continues
to perform any one or more of the Services with the express consent of such Fund
or Portfolio, then the provisions of this Agreement, including without
limitation the provisions dealing with indemnification and compensation, shall
continue in full force and effect.
4. Amendments, Assignment and Delegation
A modification of this Agreement (which term includes all Schedules) will
be effective only if in writing and signed by the affected parties. No party
shall assign the rights or delegate the duties, or outsource a significant
portion of the Services, pursuant to this Agreement without the prior written
consent of the other party or parties, except as follows:
(i) Mellon may employ such person or persons it may deem desirable to
assist it in performing the Services without notice to a Fund;
(ii) Mellon shall provide written notice to each affected Fund before
Mellon engages an unaffiliated third party to provide significant services or
functions to assist Mellon in performing the Services under this Agreement;
(iii) Mellon may delegate one or more of the functions or assign this
Agreement to any direct or indirect majority-owned subsidiary of The Bank of New
York Mellon Corporation or its successor with timely notice to the affected
Fund; and
(iv) A Fund merger or reorganization that does not result in a change
in such Fund's investment adviser and where the fund surviving from such merger
or reorganization assumes the duties and obligations of such Fund under this
Agreement shall not require Mellon's consent.
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With respect to (i), (ii) and (iii) above, Mellon shall (a) be responsible
for the acts or omissions of such persons, third parties and subsidiaries to the
same extent as Mellon's own acts or omissions under this Agreement, (b) be
responsible for the compensation of such persons, third parties and
subsidiaries, and (c) not be relieved of any of its responsibilities under this
Agreement by virtue of the use of such persons, third parties and subsidiaries.
However, if a Fund instructs Mellon to engage a Subcontractor for the
performance of any of the Services, Mellon will not be responsible for any acts
or omissions by, or compensation payable to, such Subcontractor.
This Agreement shall be binding upon, and shall inure to the benefit of,
the parties and their respective successors and permitted assigns.
5. Documentation
A. Each Fund represents that it has provided or made available to Mellon
(or has given Mellon an opportunity to examine) copies of the following
documents, current as of the Effective Date of this Agreement:
(i) The Articles of Incorporation, Agreement and Declaration of Trust,
Partnership Agreement, or other similar charter document, as relevant,
evidencing the Fund's form of organization and any current amendments thereto;
(ii) The By-Laws or procedural guidelines of each Fund;
(iii) Any resolution or other action of the Fund or the Fund board
establishing or affecting the rights, privileges or other status of any class of
shares of a Portfolio, or altering or abolishing any such class;
(iv) A copy of a resolution of the Fund board appointing Mellon to
provide the Services for each Portfolio and authorizing the execution of this
Agreement and its Schedules;
(v) A copy of the Fund's currently effective prospectus(es) and
statement(s) of additional information ("Registration Statement") under the
Securities Act of 1933 (the "1933 Act") and 1940 Act;
(vi) Copies of all pertinent Fund policies and procedures that affect
the Services, including, but not limited to, those relating to valuation,
pricing, Section 2(a)(41) of the 1940 Act and Rules 2a-4 and 2a-7 thereunder,
net asset value errors, and "as-of" processing (e.g., relating to error
corrections, post-trade revisions or similar processing policies that may
exist);
(vii) Such other documents, certificates or opinions which Mellon
reasonably believes to be necessary or appropriate in the proper performance of
the Services, subject to the agreement of the Fund, which shall not be
unreasonably withheld; and
(viii) Any amendment, revocation or other document altering, adding,
qualifying or repealing any document or authority called for under this Section.
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B. Each Fund will provide Mellon with notice and/or a copy of any material
amendment to the items set forth in this Section. Mellon will not be responsible
for changing or conforming the Services to any such amendment until Mellon has
received notice or a copy of such change, and the parties have negotiated in
good faith to reach mutually agreeable terms applicable to such additional
service(s) and have amended any affected Schedules.
6. Representations and Warranties of each Fund
Each Fund represents and warrants the following:
A. The Fund is duly organized and validly existing, in good standing under
the laws of the jurisdiction of its organization, and qualified to do business
in each jurisdiction in which the nature or conduct of its business requires
such qualification.
B. The Fund has requisite authority and power under its organizational
documents and applicable law to execute, deliver, consummate and perform this
Agreement; this Agreement is legally valid, binding and enforceable against the
Fund; and the Fund has all necessary registrations and/or licenses necessary to
conduct the activities as described in the Registration Statement.
C. There is no pending or threatened legal proceeding or regulatory action
that would materially impair the Fund's ability to perform its obligations under
this Agreement. The Fund's performance of its obligations under this Agreement
will not conflict with or result in a breach of any terms or provisions of any
agreement to which the Fund is a party or bound, and does not violate any
applicable law.
D. The Fund will use commercially reasonable efforts to ensure that Mellon
has sufficient access to the Fund's service providers, brokers, Independent
Accountant and other authorized agents (each a "Fund Agent"), and related
parties of any of them, in order to obtain the information Mellon will need to
perform the Services; provided that, Mellon shall bear no liability with respect
to such Fund Agent information to which Mellon had no access.
E. To the best of the Fund's knowledge, all the information relating to the
Fund given to Mellon in connection with the transactions contemplated by this
Agreement is full, complete and accurate, and Mellon may reasonably rely on such
information until it receives written notice from or on behalf of the Fund of
any changes to such information.
F. The Fund has provided Mellon with a current list of all approved
independent pricing, fair value information, and other data information vendors
that are to be used by Mellon in rendering the Services, as set forth in
Schedule D to this Agreement, and the Fund will promptly reflect any changes to
such list in a revised Schedule D.
G. The Fund has appropriate procedures and agreements in place to protect
the confidentiality of any non-public portfolio holdings information of the Fund
that the Fund or its agents direct Mellon to disclose or transmit to third
parties before the Fund publicly discloses such information.
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H. The Fund has the requisite amount and scope of fidelity bond coverage
required by Rule 17g-1 under the 1940 Act, and has directors' and officers'
errors and omissions insurance coverage.
7. Representations and Warranties of Mellon
Mellon represents and warrants to each Fund the following:
X. Xxxxxx is duly organized as a national banking association; is in good
standing; and is qualified to do business in each jurisdiction in which the
nature or conduct of its business requires such qualification.
X. Xxxxxx has requisite authority and power under its organizational
documents and applicable law to execute, deliver, consummate and perform this
Agreement; this Agreement is legally valid, binding and enforceable against
Mellon; and Mellon has all necessary registrations and/or licenses necessary to
perform the Services described in Schedule B.
C. There is no pending or threatened legal proceeding or regulatory action
that would materially impair Mellon's ability to provide the Services. Mellon's
performance of the Services will not conflict with or result in a breach of any
of the terms or provisions of any agreement to which Mellon is a party or bound,
and does not violate any applicable law to which Mellon is subject.
X. Xxxxxx has completed, obtained and performed all registrations, filings,
approvals, and authorizations, consents or examinations required by any
government or governmental authority to which Mellon is subject, to perform the
Services contemplated by this Agreement and will maintain the same in effect for
so long as this Agreement remains in effect.
E. To the best of Mellon's knowledge, all the information relating to
Mellon that Mellon or its authorized agents have given to a Fund in connection
with the transactions contemplated by this Agreement is full, complete and
accurate and the Fund may reasonably rely on such information until it receives
written notice from Mellon of any changes.
X. Xxxxxx will maintain a fidelity bond and an insurance policy with
respect to errors and omissions coverage in form and amount that are
commercially reasonable in light of Mellon's duties and responsibilities under
this Agreement.
X. Xxxxxx has implemented and maintains reasonable procedures and systems
(including reasonable disaster recovery and business continuity plans and
procedures consistent with legal, regulatory and business needs applicable to
Mellon's delivery of the Services) to safeguard each Fund's records and data and
Mellon's records, data, equipment facilities and other property that it uses in
the performance of its obligations hereunder from loss or damage attributable to
fire, theft, or any other cause, and Mellon will make such changes to the
procedures and systems from time to time as are reasonably required for the
secure performance of its obligations hereunder.
11
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THERE ARE NO EXPRESS OR
IMPLIED REPRESENTATIONS OR WARRANTIES AS TO THE SERVICES UNDER THIS AGREEMENT OR
THE PERFORMANCE THEREOF, INCLUDING WITHOUT LIMITATION, THE MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF THE SERVICES (IRRESPECTIVE OF ANY COURSE OF
DEALING, CUSTOM OR USAGE OF TRADE).
8. Standard of Care
Mellon shall act in good faith and exercise reasonable care in performing
the Services under this Agreement. Mellon's duties shall be confined to those
expressly set forth herein, and no implied duties are assumed by or may be
asserted against Mellon hereunder. In that regard, Mellon shall have no
responsibility for the actions or activities of any other party, including
service providers, except as provided in Section 4.
9. Indemnification and Limitation of Liability
A. Except as set forth in subparagraph F. below, Mellon will not be liable
to a Fund for any loss incurred by the Fund as a result of any error of
judgment, mistake of law, act or omission in the course of, or in connection
with the Services rendered by, Mellon under the Agreement in the absence of
fraud, negligence or willful misconduct of Mellon or the reckless disregard of
its duties under the Agreement.
B. Except as set forth in subparagraph F. below, Mellon agrees to
indemnify, defend, and hold harmless each Fund, its trustees, directors,
officers, employees, agents and nominees and their respective successors and
permitted assigns from and against claims, demands, actions, suits, judgments,
liabilities, losses, fines, damages, costs, charges, and counsel fees
(collectively, "Losses") resulting directly and proximately from Mellon's fraud,
negligence or willful misconduct in the performance of the Services, or reckless
disregard of its duties under this Agreement.
C. Each Fund agrees to indemnify, defend and hold harmless Mellon, its
trustees, directors, officers, employees, agents, and nominees and their
respective successors and permitted assigns from and against any Losses
resulting directly and proximately from Mellon's actions taken or omissions with
respect to or in connection with the performance of the Services or based, if
applicable, upon Mellon's reasonable reliance on information, records,
instructions or requests reasonably believed to be accurate and genuine
pertaining to the Services that are given or made to Mellon by the Fund, its
investment adviser, or its designated service providers with which Mellon must
interface in providing the Services; provided that this indemnification shall
not apply to actions or omissions of Mellon involving fraud, negligence, willful
misconduct, or reckless disregard in the performance of its duties under this
Agreement.
D. In order for these indemnification provisions to apply, each party
seeking indemnification or to be held harmless shall fully and promptly advise
each indemnifying party in writing of all pertinent facts concerning the
situation in question. Each party seeking indemnification will use reasonable
care to identify and notify each indemnifying party in writing promptly
concerning any situation which presents or appears likely to present the
12
probability of an indemnification claim. However, failure to do so in good faith
shall not affect the rights under this provision unless the indemnifying party
or parties, as the case may be, is materially prejudiced by such failure. As to
any matter eligible for indemnification, each indemnified party shall act
reasonably and in accordance with good faith business judgment, and shall not
effect any settlement or confess judgment without the consent of each
indemnifying party, which consent shall not be withheld or delayed unreasonably.
E. Each indemnifying party shall be entitled to participate in the defense
at its own expense, or assume the defense, of any suit brought to enforce any
claims subject to this indemnity provision. If the indemnifying party or parties
elect to assume the defense, it shall be conducted by counsel of their choosing
that is reasonably satisfactory to each indemnified party; each indemnified
party shall bear the fees and expenses of any additional counsel it retains. If
the indemnifying party or parties do not elect to assume the defense of such
suit, they will reimburse each indemnified party for the reasonable fees and
expenses of any counsel each indemnified party retains, which is reasonably
satisfactory to such indemnifying party or parties. The indemnifying party or
parties shall not effect any settlement without the consent of each indemnified
party (which shall not be withheld or delayed unreasonably) unless such
settlement imposes no liability, responsibility or other obligation upon the
indemnified party or parties and relieves them of all fault.
X. Xxxxxx agrees to reimburse each Fund or its shareholders (including
former shareholders) for any losses and reasonable reprocessing costs incurred
by such Fund or its shareholders (including former shareholders) resulting
directly and proximately from Mellon's negligence in calculating the net asset
value per share ("NAV") for such Fund. Mellon's responsibility for reimbursing
such Funds or its shareholders (including former shareholders) will be in
accordance with and subject to the Funds' policies and procedures for addressing
NAV errors set forth in the appropriate Service Level Document, including
without limitation a materiality threshold of one (unrounded) whole cent per
share per NAV error (or such other materiality threshold as agreed upon by the
parties in the appropriate Service Level Document).
Notwithstanding the foregoing, the parties acknowledge and agree that (i)
Mellon will obtain and rely (without independent verification) upon prices and
quotes from authorized pricing, data and fair valuation information vendors as
identified in Schedule D or otherwise authorized under this Agreement, and (ii)
Mellon will be without liability or responsibility for any errors or loss
occasioned by such reliance on such vendors or any errors caused by or
attributable to such vendors, subject to Mellon's material compliance with the
tolerance checks set forth in the appropriate Service Level Document.
G. Each party shall have a duty to mitigate damages for which the other
party or parties may become responsible. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL A FUND, MELLON, THEIR AFFILIATES OR
ANY OF ITS OR THEIR TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
SUBCONTRACTORS BE LIABLE FOR EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT
OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES), LOSS
OF BUSINESS, OR LOST PROFITS, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF
THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR
13
WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
10. Books and Records, Disclosure, Retention, and Rights of Ownership
X. Xxxxxx shall maintain on behalf of each Fund all books and records which
are customary or which are legally required to be kept in connection with
Mellon's performance of Services, including without limitation those required by
Rules 31a-1 and 31a-2 under the 1940 Act ("Records"). Mellon will prepare and
maintain the Records at each Fund's expense, and the Records shall be the Fund's
property. Mellon will make the Records available for inspection by the SEC,
including giving the SEC access to the Records, and otherwise surrender the
Records promptly in accordance with Rule 31a-3 under the 1940 Act. Mellon will
allow a Fund and its authorized persons and representatives to review the
Records during Mellon's normal business hours or, upon reasonable notice, at
such other reasonable times as the Fund may request.
X. Xxxxxx shall keep the Records confidential, except when: (i) disclosure
is required by law, (ii) Mellon is advised by counsel that it may incur
liability for failure to make a disclosure, (iii) Mellon is requested to divulge
such information by duly-constituted authorities or court process, or (iv) as
requested or authorized by the affected Fund (including pursuant to its policies
and procedures regarding selective disclosure of non-public portfolio
information). Mellon shall use commercially reasonable efforts to provide
reasonable advance notice to each affected Fund and its administrator of
requests for disclosure pursuant to items (i) - (iii) of the previous sentence,
and to the extent reasonably practicable to secure instructions as to such
inspection, but shall not be deemed to violate the confidentiality provisions of
this Section or Section 11 if Mellon discloses such Records upon reasonable
belief that it is obliged to do so by applicable law or regulatory authority.
C. Upon and subject to payment of any undisputed and unpaid amounts owed to
Mellon under this Agreement, Mellon may at its option at any time after
termination of this Agreement, and shall promptly upon a Fund's demand or upon
termination of this Agreement, turn over to the Fund or its designated agent,
and cease to retain in Mellon's files, any Records created and maintained by
Mellon pursuant to this Agreement which are no longer needed by Mellon in the
performance of the Services or for its legal protection. If not so turned over
to the Fund, such Records will be retained by Mellon, at the expense of the Fund
(which shall be equal to the actual costs incurred by Mellon), for at least six
(6) calendar years from the year of creation or for such other period of time as
is required under applicable law. At the end of such period, such Records will
be turned over to the Fund unless the Fund authorizes in writing the destruction
of such Records.
D. Notwithstanding the foregoing, all computer programs, systems and
procedures employed or developed by or on behalf of Mellon, or on behalf of
Mellon by system providers or vendors used by Mellon, to perform the Services
that are not Records are the sole and exclusive property of Mellon.
14
11. Confidential Information; Trade Names, Trademarks and Service Marks
A. "Confidential Information" of a party shall be maintained confidential
by any other party, and shall include: (a) any data or information that is
competitively sensitive material, and not generally known to the public,
including, but not limited to, information about product plans, marketing
strategies, finances, operations, customer relationships, customer profiles,
customer lists, sales estimates, business plans, and internal performance
results relating to the past, present or future business activities of a Fund or
Mellon, their respective subsidiaries and affiliated companies and the
customers, clients and suppliers of any of them; (b) any scientific or technical
information, design, process, procedure, formula, or improvement that is
commercially valuable and secret in the sense that its confidentiality affords
the Fund or Mellon a competitive advantage over its competitors; (c) all
confidential or proprietary concepts, documentation, reports, data,
specifications, computer software, source code, object code, flow charts,
databases, inventions, know-how, and trade secrets, whether or not patentable or
copyrightable; (d) non-public portfolio holdings information of the Fund; and
(e) anything designated as confidential. Mellon shall maintain adequate
safeguards to prevent the use of each Fund's non-public portfolio holdings
information by Mellon, its employees and affiliates for any purpose other than
performing the Services under this Agreement. Mellon also shall maintain
adequate safeguards to limit the dissemination of each Fund's non-public
portfolio holdings information to third parties in accordance with
non-disclosure agreements with the particular Fund, Instructions pursuant to
Section 14, or directions of the Fund under Section 15.C. However, Confidential
Information shall not be subject to such confidentiality obligations if it: (a)
is already known to a receiving party at the time it is obtained; (b) is or
becomes publicly known or available through no wrongful act of a receiving
party; (c) is rightfully received from a third party who, to the best of a
receiving party's knowledge, is not under a duty of confidentiality; (d) is
released by a protected party to a third party without restriction; (e) is
required to be disclosed pursuant to the Fund's Registration Statement or by a
requirement of a court order, subpoena, governmental or regulatory agency or law
(provided the disclosing party will promptly provide the other party written
notice of such requirement, to the extent such notice is permitted); (f) is
relevant to the defense of any claim or cause of action asserted against a
receiving party; or (g) has been or is independently developed or obtained by a
receiving party.
X. Xxxxxx also acknowledges Confidential Information includes nonpublic
personal information about a Fund's customers ("Customer Information") that the
Fund is required by Regulation S-P to keep confidential. Accordingly, Mellon
agrees that, to the extent it receives such Customer Information, it shall not:
(i) use or disclose Customer Information other than to carry out the
purposes for which a Fund or one of its affiliates disclosed such Customer
Information to Mellon; or
(ii) disclose any Customer Information other than:
(a) to Fund affiliates;
(b) to Mellon affiliates, provided that such affiliates need the
Customer Information to be able to provide the Services hereunder and
shall be restricted in use and disclosure of the Customer Information
to the same extent as Mellon;
15
(c) to subcontractors of Mellon or the Fund, provided that such
subcontractors need the Customer Information to be able to provide the
Services hereunder and shall have entered into a confidentiality
agreement no less restrictive than the terms hereof; and
(d) to comply with federal, state or local laws, rules and other
applicable legal requirements; to comply with a properly authorized
civil, criminal, or regulatory investigation, or subpoena or summons
by federal, state, or local authorities; or to respond to judicial
process or government regulatory authorities having jurisdiction for
examination, compliance, or other purposes as authorized by law
(provided Mellon will promptly provide the Fund written notice of such
requirement, to the extent such notice is permitted).
For purposes of this paragraph, the term "affiliate" shall have
the meaning set forth in Regulation S-P. To the extent any provisions
of this paragraph conflict with other terms of this Agreement, this
paragraph shall control.
C. Neither party shall use the trade name, trademark or service xxxx of the
other party without the prior written consent of the other party; provided,
however, that (a) either party may use the trade name, trademark or service xxxx
of the other party in connection with providing the Services under the
Agreement, or (b) the Fund may use the trade name, trademark or service xxxx of
Xxxxxx in connection with their Registration Statements.
12. Reports
X. Xxxxxx shall furnish reports to a Fund, its Fund Agents and to others
that the Fund designates in writing at such times as are prescribed pursuant to
this Agreement to be provided or completed by Mellon, or as subsequently agreed
upon by the parties pursuant to this Agreement or any amendment thereto. Each
Fund agrees to examine each report promptly and will communicate or cause to be
communicated any errors or discrepancies therein. If there are errors or
discrepancies in a report (except such errors and discrepancies as may not
reasonably be expected to be discovered by the recipient after conducting a
diligent examination) that are not so reported promptly, then a report will for
all purposes be accepted by and binding on the Fund and any other recipient,
absent fraud, negligence, willful misconduct, or reckless disregard of Mellon's
duties under this Agreement, and Mellon shall have no further responsibility
with respect to such report other than to correct and revise it.
B. For the two month period ending on December 31, 2007, Mellon shall cause
its auditors to perform a Type I SAS 70 audit of Mellon's internal controls and
procedures relating to the Services provided to the Funds that have been
converted onto Mellon's fund accounting platform from November 1, 2007 until
December 31, 2007. For each Fund that has been converted onto Mellon's fund
accounting platform during the period from November 1, 2007 until December 31,
2007, Mellon shall provide such Fund (together with its chief compliance officer
or its designated representative) with a copy of the report resulting from such
Type I SAS 70 audit no later than 45 days after December 31, 2007. For the six
month period ending on June 30 of each year and the twelve month period ending
on December 31 of each year commencing
16
in 2008, Mellon shall cause its auditors to perform a Type II SAS 70 audit of
Mellon's internal controls and procedures relating to the Services provided to
the Funds that have been converted onto Mellon's fund accounting platform prior
to the end of the applicable audit period. For each Fund that has been converted
onto Mellon's fund accounting platform prior to the end of the applicable audit
period, Mellon shall provide such Fund (together with its chief compliance
officer or its designated representative) with a copy of the report resulting
from such Type II SAS 70 audit no later than 45 days after the end of the
applicable audit period. All SAS 70 audit reports shall be treated as
Confidential Information.
13. Notices
Any communication, notice or demand pursuant to this Agreement shall be
properly addressed, in writing and delivered by personal service (including
express or courier service), registered or certified mail, or by facsimile with
proof of proper transmission and a means for confirmation of delivery to
recipient, as follows:
If to Mellon:
Mellon Bank, N.A.
000 Xxxxxxxx Xxxxxxx, AIM 026-0026
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxx, First Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Mellon Bank, N.A.
135 Xxxxxxxx Highway, AIM 026-0011
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq., First Vice President &
Senior Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
The Bank of New York Mellon Corporation
One Mellon Center
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq., Senior Vice President
and Associate General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
17
If to a Fund:
Optimum Fund Trust
c/o Delaware Service Company, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Delaware Service Company, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
14. Authorized Persons and Instructions
A. Each Fund shall deliver to Mellon a list of the names, titles and
signatures of all persons who are authorized to act on behalf of the Fund to
issue instructions to Mellon ("Authorized Persons" and "Instructions"),
including any limits on the scope of authority of any Authorized Persons. Fund
trustees, directors and officers shall be presumptively considered Authorized
Persons unless the Fund notifies Mellon to the contrary. Each Fund shall
promptly notify Mellon of any changes to or limitations on the rights, powers
and duties of any Authorized Person, but in the absence of receiving such
notice, Mellon shall be entitled to deal with any Authorized Person and to act
and rely upon any Instructions reasonably believed to be from such Authorized
Person.
B. An Instruction means a writing signed or initialed by one or more
Authorized Person. Each such writing shall set forth the specific transaction or
type of transaction involved. Oral instructions will be deemed Instructions if
Mellon reasonably believes them to have been given by an Authorized Person, and
the oral instructions are promptly confirmed in writing.
15. Advice, Reliance and Instructions
X. Xxxxxx may apply to a Fund at any time for Instructions and may consult
with Mellon's or the Fund's counsel, Independent Accountant and other experts
with respect to any matter arising in connection with the Services performed by
Mellon, and Mellon shall not be liable nor accountable for any action taken or
omitted by it in good faith in accordance with such Instructions or on the
advice of such counsel, Independent Accountant or other experts. To the extent
possible, Mellon shall notify the Fund at any time Mellon believes it needs
advice of the Fund's counsel, Independent Accountant or experts with regard to
Mellon's responsibilities and
18
duties pursuant to this Agreement. If Mellon wishes to seek and rely on legal
advice from counsel that is neither the Fund's counsel nor counsel in the
regular employ of Mellon or its affiliated companies, and Mellon seeks to be
reimbursed for such counsel fees, then Mellon must notify and seek prior
approval of such affected Fund, which shall not be unreasonably withheld. Mellon
shall in no event be liable to a Fund or any Fund shareholder or beneficial
owner for any action reasonably taken or omitted pursuant to such advice.
X. Xxxxxx may rely conclusively upon the terms of a Registration Statement,
the minutes of Fund board meetings and any other Fund document Mellon reasonably
believes to be genuine unless and until Mellon receives Instructions to the
contrary.
C. Subject to the instructions of an Authorized Person, Mellon may provide
information pertaining to a Fund's portfolio holdings to entities designated by
such Authorized Person.
D. Each Fund understands and acknowledges that the Services are intended to
assist the Fund and its board in their obligations to price and monitor pricing
of the Fund's portfolio securities, but Mellon does not assume responsibility
for the accuracy or appropriateness of pricing information received from the
Fund or other non-Mellon entities or pricing methodologies, including any fair
value pricing information or adjustment factors. Each Fund further understands
and acknowledges that it retains overall responsibility to: (i) adopt policies
and procedures to monitor for circumstances that may necessitate the use of fair
value prices; (ii) establish criteria for determining when market quotations are
no longer reliable for a particular portfolio security; (iii) determine a
methodology or methodologies by which the Fund determines the current fair value
of portfolio securities; (iv) regularly review the appropriateness and accuracy
of the method used in valuing securities and make any necessary adjustments; and
(v) promptly communicate the foregoing in writing to Mellon pursuant to Section
14.
E. Each Fund authorizes Mellon to communicate, as required, with the Fund's
service providers, brokers, futures commission merchants, Independent Accountant
and/or other authorized agents and related parties of any of them to obtain the
information Mellon needs to perform the Services. In that regard, Mellon agrees
to cooperate with each Fund's Independent Accountant, to reasonably support the
Independent Accountant's engagement with the Fund, and to provide the
Independent Accountant reasonable access to the Records. Mellon also agrees to
provide periodic sub-certifications to each Fund's chief compliance officer and
certifying principal executive and financial officers relating to the Services
Mellon performs, based on a form of sub-certification that Mellon and the Fund
reasonably agree to, and subject to such limitations as may be reasonable or
necessary to not make a material misstatement, omission or untrue statement of
fact.
16. Compliance with Law
A. In performing the Services, Mellon shall comply with all applicable
laws, and its standard of performance shall be in accord with such standards as
may be imposed by law and the requirements of all regulatory authorities.
However, unless specifically identified in the Services, nothing expressly or
implicitly contained in this Agreement is intended or shall be interpreted to
confer upon Mellon a duty to ensure that each Fund is acting in compliance with
19
any applicable laws. Except for the obligations of Mellon set forth in Schedule
B, each Fund assumes full responsibility for the preparation, contents and
distribution of the Fund's Registration Statement and compliance with applicable
laws, including the requirements of the 1933 Act and the 1940 Act, and
governmental authorities having jurisdiction.
X. Xxxxxx shall use its commercially reasonable efforts to make its
employees who are responsible for providing the Services ("Relevant Employees")
available to federal, state and local governmental and regulatory and
supervisory authorities having jurisdiction over the performance of the Services
("Governmental Authorities") as may be required by such Governmental Authorities
pursuant to applicable law, subpoena or order, and as may be requested by any
Governmental Authorities on behalf of or with respect to a Fund or any of its
affiliates or as may be requested by the Fund to be made available to such
Governmental Authorities. To the extent legally permitted, Mellon shall promptly
notify the affected Fund of any request by any Governmental Authorities for any
Relevant Employees (except when the request for access to Relevant Employees was
made by the Fund). The affected Fund shall cooperate, and shall use its
commercially reasonable efforts to cause each of its affiliates and service
providers to cooperate, with Mellon in complying with any notice, order,
subpoena or request of any Governmental Authority. Except as provided in
Sections 8 and 9, Mellon shall have no liability to a Fund or any third party
for any claims, obligations, penalties or fines which may arise out of or in
relation to Mellon's compliance with this provision. In accordance with Section
2.C.(vi), the affected Fund shall reimburse Mellon in connection with providing
such access. Nothing contained in this paragraph shall require Mellon to
disclose any proprietary or confidential information of Mellon or its other
customers and clients.
17. Governing Law and Jurisdiction
This Agreement and performance hereunder and all suits and proceedings
hereunder shall be governed by and construed in accordance with the internal
laws of the Commonwealth of Pennsylvania, without giving effect to conflict of
law principles. Each of the parties to this Agreement expressly and irrevocably
submits to the exclusive jurisdiction of the courts of Pennsylvania and waives
any claims of inconvenient forum or venue. To the extent that the laws of the
Commonwealth of Pennsylvania conflict with the applicable provisions of the 1940
Act, the applicable provisions of the 1940 Act shall control.
18. Services Not Exclusive
X. Xxxxxx'x Services are not exclusive to a Fund and Mellon shall be free
to render similar services to others.
X. Xxxxxx shall perform the Services solely as an independent contractor
and no joint venture, partnership, employment, agency or any other relationship
is intended, accomplished or embodied in this Agreement. Mellon shall have the
sole and exclusive right to supervise, manage, control and direct its
performance of the Services, except that Mellon may be subject to performance
standards and measurements for performing the Services.
20
C. In performing the Services, Mellon is acting solely on behalf of a Fund
and no contractual or service relationship shall be deemed to be established
between Mellon and any other person, including without limitation the custodian
and Fund shareholders.
19. Force Majeure and Uncontrollable Events
Mellon shall maintain adequate and reliable computer and other equipment
necessary or appropriate to carry out its obligations under this Agreement. Upon
a Fund's reasonable request, Mellon shall provide supplemental information
concerning the aspects of its disaster recovery and business continuity plan
that are relevant to the Services. Notwithstanding the foregoing or any other
provision of this Agreement, Mellon assumes no responsibility hereunder, and
shall not be liable for, any damage, loss of data, business interruption, delay
or any other loss whatsoever caused by "Force Majeure Events." "Force Majeure
Events" are events beyond the reasonable control of Mellon, its agents and its
Subcontractors (other than Subcontractors engaged by Mellon at the instruction
of a Fund). In the event of Force Majeure Events, or any disaster that causes a
business interruption, Mellon shall act in good faith and follow applicable
procedures in its disaster recovery and business continuity plan and use all
commercially reasonable efforts to minimize service interruptions.
20. Severability
If any provision of this Agreement shall be held or made invalid, the
remainder of this Agreement and the parties' rights and obligations under it
shall not be affected by such action, and the invalid provisions of the
Agreement shall be deemed to be severable only in the jurisdiction that so
determines.
21. Survivability
The following provisions shall survive beyond the expiration and
termination of this Agreement:
o all compensation provisions, including Section 2 Compensation and
Expenses, Section 3 regarding termination fees, costs and
expenses, and Schedule C;
o Section 4. Amendments, Assignment and Delegation;
o Section 6. Representations and Warranties of each Fund;
o Section 7. Representations and Warranties of Mellon;
o Section 9. Indemnification and Limitation of Liability;
o Section 10. Books and Records, Disclosure, Retention, and Rights
of Ownership;
o Section 11. Confidential Information;
o Section 14. Authorized Persons and Instructions;
21
o Section 19. Force Majeure and Uncontrollable Events; and
o Section 20. Severability.
22. Contract Terms To Be Exclusive
This Agreement constitutes the complete agreement of the parties about the
covered subject matter, and supersedes all prior negotiations, understandings
and agreements bearing upon the covered subject matter. As noted in Section
1.B., Mellon and each Fund may enter into Service Level Documents or other
interpretive documents in connection with this Agreement. Any such Service Level
Documents or interpretive agreements may be in writing and signed by all
parties, but shall not be deemed to be an amendment to this Agreement, and
because the intent of such agreements is to generally facilitate operations in a
flexible manner, the breach of any such agreement shall not necessarily
constitute a breach of this Agreement, and the parties shall be free to change
the terms of such agreements as provided therein.
23. Waiver
A party's waiver of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach by any party. A
party's failure to insist upon strict adherence to any provision of the
Agreement shall not constitute a waiver or deprive such party of the right to
insist upon strict adherence to such provision.
24. Counterparts and Reproduction of Documents
This Agreement may be executed in any number of counterparts, each of which
is deemed an original and all of which together evidence the entire Agreement.
This Agreement and any amendments may be reproduced by any commercially
acceptable process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceedings, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement facsimile or further reproduction of such reproduction shall be
likewise admissible in evidence.
25. Miscellaneous
Paragraph headings in this Agreement are included for convenience only and
are not to be used to construe or interpret this Agreement.
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
MELLON BANK, N.A.
By: /s/ Xxxxxxxxxxx Xxxxx
Title: First Vice President
OPTIMUM FUND TRUST, on behalf of its
Portfolios identified on Schedule A
By: /s/ Xxxxxxx Xxxxx
Title: Chief Financial Officer
23
SCHEDULE B TO THE
FUND ACCOUNTING AND FINANCIAL ADMINISTRATION SERVICES AGREEMENT BETWEEN
MELLON BANK, N.A. AND THE FUNDS,
Dated October 1, 2007
FUND ACCOUNTING AND FINANCIAL ADMINISTRATION SERVICES
Mellon shall perform for each Fund and each of its Portfolios the following
fund accounting, financial administration and related services. Unless otherwise
noted, capitalized terms used herein shall have the same meanings assigned to
them in the Agreement.
A. Valuations
In accordance with the 1940 Act, a Fund's pricing policies and procedures
delivered to Mellon, and a Fund's prospectus and statement of additional
information, and subject to the existence of authorized licensing arrangements
and Instructions, Mellon will perform the following pricing and valuation
services:
1. Perform the necessary functions to calculate daily the net asset value per
share ("NAV") for each share class of each Portfolio of the Fund.
2. Calculate the value of the assets of each Portfolio by obtaining securities
prices and readily available market quotations from independent pricing
sources, subject to any adjustments by the fair valuation information
vendors, in each case using a source/vendor approved by the Fund and listed
in Schedule D to the Agreement. If market quotations for portfolio
securities are not readily available, notify the Fund and obtain prices
from authorized broker sources and/or use fair values as determined in good
faith by the Fund's board of directors/trustees, which includes, but is not
limited to, using values determined by the Fund's pricing policies and
procedures and values approved by the Fund's Valuation/Pricing Committee.
3. Assist in resolving pricing discrepancies and implement mutually agreed
upon price variance thresholds and notification processes.
4. In accordance with the Fund's NAV error correction policies provided to
Mellon, notify the Fund promptly upon discovery of NAV errors of a
Portfolio and initiate correction processes.
B. Calculation and Payment of Expenses
1. Based upon information provided by one of the Fund's Authorized Persons to
Mellon, calculate asset-based fees and submit to the Fund
Treasurer/Principal Financial Officer for approval, and instruct the
custodian to wire fee payments to the service providers.
2. Accrue expense waivers based on Instructions and provide reporting of
accruals of expense waivers.
3. Accrue and allocate fee payments to directors/trustees and other officers
of the Fund paid directly by the Fund according to Instructions and on a
monthly basis forward cash to the Fund's Authorized Persons in the amount
necessary to make such payments to the directors/trustees and other
officers of the Fund.
4. Prepare expense reports, liabilities analysis and budgets for each
Portfolio of the Fund for review and approval by the Fund
Treasurer/Principal Financial Officer, including
24
maintaining detailed records pertaining to expense accruals and payments,
adjusting reports to reflect accrual adjustments, and monitoring all Fund
expenses.
5. Forward any invoices payable by the Fund to the Fund's Authorized Persons
for review and approval. Effective as of October 1, 2008, pay any invoices
approved by the Fund's Authorized Person for payment on behalf of the Fund.
(Prior to October 1, 2008, Delaware Service Company, Inc. will pay such
invoices.) Allocate such invoices among the Portfolios in accordance with
pre-established instructions from the Fund's Authorized Persons. Record the
payment of invoices on the Fund's books.
6. Provide to the Fund a monthly summary of disbursements.
C. Financial Reporting
1. Prepare agreed upon financial reporting information for the Fund and/or
each Portfolio: (i) for proxy/information statements, registration
statements (including prospectuses, statements of additional information,
and business combination/exchange offers under Form N-14), Section 19
notices, periodic shareholder reports (both semi-annual and annual), Form
N-CSRs, Form N-Qs, Form N-SARs and such other communications required or
otherwise sent to investors and/or filed with regulatory agencies; (ii) to
the Investment Company Institute; (iii) to statistical reporting and rating
agencies; and (iv) regarding a closed-end Fund's issuance of preferred
stock and commercial paper. Additionally, review and provide comments to
the Fund or a Fund Agent to allow for completion of such reports in
accordance with defined timelines.
2. Prepare other reports, notices or financial documents in accordance with
generally accepted accounting principles, as required by federal, state and
other applicable laws and regulations, in each case as the parties may
agree upon from time to time.
3. Assist in preparing financial information relating to a closed-end Fund's
earnings press release, if any. 4. Provide financial information needed for
the offer letter to assist with buyback and tender offers for a closed-end
Fund, if any.
5. Provide 1940 Act Rule 2a-7 amortized cost monitoring (xxxx-to-market)
reports for a money market Portfolio with such frequency as is agreed upon
by parties, or as may be required by Rule 2a-7 and the Fund's policies and
procedures.
6. Prepare and provide such detailed financial reports as may be necessary for
the Fund's board of directors'/trustees' reporting process and as the
parties may agree upon from time to time.
7. Provide sub-certifications in an agreed-upon form to the Fund's chief
compliance officer and certifying principal executive and financial
officers with respect to the generation of financial statements and other
financial reporting performed by Mellon.
D. Portfolio Securities Transactions
Based on information that is provided to Mellon by the Fund, its investment
adviser, and the Fund's Authorized Persons, Mellon will perform the following
functions:
1. Maintain records of investment, capital share, and income and expense
activities for each Portfolio by: (i) recording purchases and sales of
investments; (ii) recording corporate actions and capital changes relating
to investments; (iii) accruing interest, dividends and
25
expenses on investments; and (iv) maintaining the historical tax lots and
income history for investments.
2. In instances where Mellon is the custodian of the affected portfolio
securities, notify, as directed, the applicable investment adviser (or, if
applicable, sub-adviser) with respect to mandatory and voluntary corporate
actions. The Fund's elections (on actions where elections and options
exist) on voluntary corporate actions must be communicated to Mellon by one
of the Fund's Authorized Persons on the deadline date stated on the
corporate actions notice, allowing a reasonable amount of time before the
stated deadline for Mellon to input the election on the fund accounting
system and notify the custodian (as applicable). Mellon will use
commercially reasonable efforts to respond on behalf of the Fund if a
response is received by Mellon after the deadline date.
3. In instances where Mellon is not the custodian of the affected portfolio
securities, Mellon will notify, as directed, the applicable investment
adviser (or, if applicable, sub-adviser) with respect to mandatory and
voluntary corporate actions upon Mellon's receipt of the corporate action
information. In addition, where Mellon receives mandatory and voluntary
corporate action information in its capacity as portfolio accountant for
other clients on the same accounting platform, Mellon agrees to use
commercially reasonable efforts to identify actions applicable to the
Fund's portfolio securities. However, Mellon assumes no liability for
failing to identify and provide notice of such actions with respect to a
portfolio security when Mellon does not separately receive notice from the
custodian for such portfolio of securities. The Fund's elections (on
actions where elections and options exist) on voluntary corporate actions
must be communicated to Mellon by one of the Fund's Authorized Persons on a
date established by Mellon sufficiently in advance of the deadline date
stated on the custodian's corporate actions notice to permit Mellon to
input the election on the fund accounting system and notify the custodian
by its stated deadline. Mellon will use commercially reasonable efforts to
respond on behalf of the Fund if a response is received by Mellon after a
deadline date.
4. Book corporate action activity upon timely receipt of information and
Instructions from one of the Fund's Authorized Persons.
5. Receive, update and process daily trade files from the Fund investment
adviser's order management system.
6. Based on Instructions from one of the Fund's Authorized Persons or the Fund
Treasurer/Principal Financial Officer, implement tax lot relief
methodology.
E. Dividends & Distributions
Subject to review and approval of the Fund's Treasurer/Principal Financial
Officer, Mellon will perform the following functions:
1. Provide the Fund's transfer agent, dividend disbursing agent and custodian
with such information as is required for such parties to effect the payment
of dividends and distributions and to implement the Fund's dividend
reinvestment plan, if any.
2. Calculate income projections and provide such projections to the Fund for
completion of the Section 19(a) notices and respond to any questions or
issues raised by such projections.
3. Periodically calculate and report each Portfolio's "investment company
taxable income," "net capital gain" distributions, and realized and
unrealized capital gains, and calculate amount of distribution to avoid
application of excise tax, in accordance with IRS
26
Subchapter M requirements and the Portfolio's distribution policies as
disclosed in the Portfolio's prospectus and established by resolution of
the Fund's board of directors/trustees.
F. Reconciliation and Cash Management
1. Reconcile trade tickets and fund holdings list with investment adviser
records on a daily basis.
2. Reconcile the cash and portfolio investments of the Portfolio with the
records of the Fund's custodian, and provide corresponding reconciliation
reports to the Fund and Fund Agents.
3. Calculate and provide cash projections daily for each Portfolio of the Fund
based on estimates of portfolio security transactions (including projected
income and dividend receipts), shareholder transactions, and Fund
distributions/reinvestments.
4. Calculate and provide daily the cash available for each Portfolio of the
Fund.
5. In coordination with the Fund's investment adviser, allocate trades among
the Portfolios with respect to master repurchase agreement investments and
other short-term investments.
G. Shareholder Activity
1. Record and reconcile daily shareholder activity, including: (i) recording
subscriptions, redemptions, and dividend reinvestments; (ii) reconciling
settlements of shareholder activity; and (iii) recording Portfolio shares
outstanding to the records maintained by each Portfolio's transfer agent
and communicate exceptions to transfer agent which is responsible for
researching exceptions.
2. Provide financial and pricing information to support transfer of portfolio
securities in connection with shareholder transfer-in-kind (purchase and
redemption) transactions.
3. Support the estimation/price protection process and other "post-nightly"
and "as of" shareholder recording processes, including but not limited to,
defined contribution clearance and settlement and same day cash.
H. Fund Performance Information
1. Calculate each Portfolio's performance, including calculations of yield,
total return, expense ratio, portfolio turnover rate and dollar-weighted
average maturity, as applicable, in accordance with standardized SEC
reporting requirements, and provide to the Fund. Calculate and provide such
additional performance information as may be reasonably requested by the
Fund or the Fund's Authorized Persons.
I. Audit Support
1. Provide timely assistance with audit requests from the Fund, its internal
auditors, its Independent Accountants, and regulatory agencies. Respond to
inquiries from other Fund Agents regarding Mellon's processes and interface
with such Fund Agents to support annual SAS 70 audits of such Fund Agents.
2. Prepare work papers for the Fund's annual audit by the Fund's Independent
Accountants, and coordinate the annual audit by the Fund's Independent
Accountants.
3. Provide results of Mellon's semi-annual SAS 70 audits.
27
J. Tax Reporting
1. Provide the financial information necessary for the Fund's preparation of
its federal, state and city tax returns and ancillary schedules, including
year-end excise tax distributions, and compliance with Subchapter M and
Section 4982 of the Internal Revenue Code of 1986 (the "Code"). Provide
completed Internal Revenue Service forms for the Funds, such as Form
1120-RIC, necessary to file tax returns in accordance with filing deadlines
and maintain copies of all tax returns and related workpapers.
2. Provide financial data regarding portfolio investments to the Fund's
transfer agent to support the production of Form 1099s and similar
shareholder tax reporting.
K. Compliance Monitoring
1. Establish, maintain, and provide summaries of, internal operating policies
and procedures to support the performance of the Services by Mellon.
2. Conduct testing of each Portfolio for compliance with the Code's
requirements to qualify as a regulated investment company, including but
not limited to: (i) quarterly diversification requirements; (ii) annual
income qualification test; and (iii) annual distribution requirements
(including avoiding application of excise taxes). Provide the results to
the Fund's chief compliance officer.
L. Data Feeds
Subject to the existence of authorized licensing arrangements and Instructions,
Mellon will perform the following functions:
1. Disseminate each Portfolio's NAV, dividend and portfolio data to Fund
Agents and Fund-authorized third parties (including, if a closed-end fund,
the stock exchange on which the Fund is listed) and maintain quality
controls necessary to ensure accuracy of the data.
2. Provide holdings information to the Fund's proxy voting agent on a monthly
basis in support of Form N-PX preparation and filing requirements.
3. Provide month-end data feeds at the end of the 1st business day of the new
month and subsequent month-end feeds as data changes in the month-end area.
4. Provide daily data feeds inclusive of that day's trading activity to the
Fund.
5. Provide the necessary data feeds to retirement systems (mainframe).
6. Provide the capability to re-transmit data feeds for past periods.
7. Provide to Bloomberg price/cash file daily.
8. Provide the data necessary for the Fund's internet/intranet applications
and maintain the subject matter expertise and quality controls required to
ensure data accuracy.
9. Provide the release management plan (software development lifecycle
process), release cycle and prior notification of any changes that affect
the data feeds.
28
M. Business Continuity
1. Provide summaries of Mellon's disaster recovery plan for business
continuity, together with summaries of any disaster recovery testing and
results, with respect to those functions performed by Mellon, except that
Mellon is not responsible for disaster recovery plans for business
continuity with respect to any underlying system upon which Mellon relies
and Mellon neither operates nor controls. Conduct and participate in
pre-defined disaster recovery testing as reasonably requested.
N. Performance of Services by Mellon
1. Monitor Mellon's performance and provide a monthly performance monitoring
report against mutually agreed upon metrics.
2. Develop and implement corrective action plans in the event of service
requirement defaults.
O. Relationship Management
1. Provide client service support to the Fund, including access to day-to-day
points of contact and to points of escalation as necessary.
2. At a minimum, conduct semi-annual meetings with Fund management to discuss
trends, technology and strategic direction.
3. Conduct an annual meeting with Fund management to discuss the Services
provided, system functionality and documentation of policies and
procedures.
P. Books and Records
1. Maintain the general ledger and other accounts, books and financial records
of the Fund, as required under Section 31(a) of the 1940 Act and the rules
thereunder in connection with the Services.
2. Comply with SEC and 1940 Act rules and regulations regarding record
retention and maintenance of records on- and off-site as required.
3. Provide the Fund's investment adviser with view and query access to the
accounting systems.
4. Assist with the set-up of new Fund accounts and the maintenance and
termination of existing Fund accounts.
Q. Other
1. Provide financial administration and fund accounting support for projects
and processes as needed and/or required. Examples include establishment of
new registrants, series and/or classes; Fund and/or Portfolio mergers,
liquidations, conversions and proxy statements; insurance policy renewals;
and issues relating to the application of fees and expense waivers. In the
event that completion of a project or process necessitates Mellon to expend
extraordinary expenses, both parties will negotiate in good faith to
compensate Mellon for all or a portion of these expenses while taking into
consideration other relevant factors such as cost sharing with other Mellon
clients and future revenue projections from such projects or processes.
2. Provide operational and financial reporting support to the Fund and each
Portfolio in connection with its credit facilities.
29
3. As applicable, support the Fund's transfer agent with respect to dividend
re-purchase processing and communication with omnibus dealers.
[This Space Intentionally Left Blank]
30
MELLON BANK, N.A.
By: /s/ Xxxxxxxxxxx Xxxxx
Title: First Vice President
OPTIMUM FUND TRUST, on behalf of its
Portfolios identified on Schedule A
By: /s/ Xxxxxxx Xxxxx
Title: Chief Financial Officer
SCHEDULE D TO THE
FUND ACCOUNTING AND FINANCIAL ADMINISTRATION SERVICES AGREEMENT BETWEEN
MELLON BANK, N.A. AND THE FUNDS,
Dated October 1, 2007
LIST OF AUTHORIZED PRICING VENDORS:
------------------------------------------- ------------------------------------
Name of Vendor Types of Securities
--------------------------------------------------------------------------------
Interactive Data Equities (US and Foreign), Taxable
Bonds, Non Taxable Bonds, CDS
--------------------------------------------------------------------------------
Standard & Poor's (including XX Xxxxx) Non Taxable Bonds, Taxable Bonds
--------------------------------------------------------------------------------
Bloomberg Equities, Bonds, Futures, Options
--------------------------------------------------------------------------------
Reuters Exchange Rates, Equities, Taxable
Bonds
--------------------------------------------------------------------------------
Markit Data (via Interactive Data) CDS and CDX Swap pricing (this is
eitherdirect or via IDC)
--------------------------------------------------------------------------------
FAIR VALUATION INFORMATION VENDOR(S):
--------------------------------------------------------------------------------
Name of Vendor Types of Securities
--------------------------------------------------------------------------------
Interactive Data Fair Value Service Foreign Equities
--------------------------------------------------------------------------------
LIST OF AUTHORIZED DATA INFORMATION
VENDORS:
--------------------------------------------------------------------------------
Name of Vendor Type of Service
--------------------------------------------------------------------------------
GICS Security Classifications
--------------------------------------------------------------------------------
Xcitek Corporate Actions Notifications
--------------------------------------------------------------------------------
S&P - CUSIP CUSIP Database
--------------------------------------------------------------------------------
Securities Class Action Services LLC Class Action Notification
--------------------------------------------------------------------------------
LSE - SEDOL License SEDOL Database
--------------------------------------------------------------------------------
Thomson Financial Municipal Floating Rates
--------------------------------------------------------------------------------
MELLON BANK, N.A.
By: /s/ Xxxxxxxxxxx Xxxxx
Title: First Vice President
OPTIMUM FUND TRUST, on behalf of its
Portfolios identified on Schedule A
By: /s/ Xxxxxxx Xxxxx
Title: Chief Financial Officer
31
