EXHIBIT 23(H)(2)
INVESTMENT COMPANY SERVICES AGREEMENT BETWEEN REGISTRANT,
LEVERAGED INDEX MANAGEMENT COMPANY, AND DECLARATION SERVICE COMPANY
INVESTMENT COMPANY SERVICES AGREEMENT
OPTIMAL FUNDS, INC.
THIS AGREEMENT, dated as of the 1st day of May, 1999, made by and between
Optimal Funds, Inc. ("Fund"), a corporation operating as an open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), duly organized and existing under the laws of the State of
Maryland, Leveraged Index Management Company ("Adviser"), a corporation duly
organized under the laws of Vermont, and Declaration Service Company
("Declaration"), a corporation duly organized under the laws of the Commonwealth
of Pennsylvania (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund is authorized by its Articles of Incorporation and By-
Laws to issue separate series of shares representing interests in separate
investment portfolios which are identified on Schedule "C" attached hereto and
which Schedule "C" may be amended from time to time by mutual agreement of the
Fund and Declaration; and
WHEREAS, the Fund and the Adviser have entered into an "Operating Services
Agreement" dated as of April 17, 1999, authorizing the Adviser to provide
certain investment company services to the Fund, and which further authorizes
the Adviser to enter into this Investment Company Services Agreement (hereafter
"Agreement") on behalf of the Fund; and
WHEREAS, the Parties desire to enter into an agreement whereby Declaration
will provide the services to the Fund as specified herein and set forth in
particular in Schedule "A" which is attached hereto and made a part hereof.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange for good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
GENERAL PROVISIONS
Section 1. Appointment.
The Adviser hereby appoints Declaration as servicing agent to the Fund and
Declaration hereby accepts such appointment. In order that Declaration may
perform its duties under the terms of this Agreement, the Board of Directors of
the Fund shall direct the officers, investment adviser, legal counsel,
independent accountants and custodian of the Fund to cooperate fully with
Declaration and, upon request of Declaration, to provide such information,
documents and advice relating to the Fund which Declaration requires to execute
its responsibilities hereunder. In connection with its duties, Declaration shall
be entitled to rely, and will be held harmless by the Fund when acting in
reasonable reliance, upon any instruction, advice or document relating to the
Fund as provided to Declaration by any of the aforementioned persons on behalf
of the Fund. All fees charged by any such persons acting on behalf of the Fund
will be deemed an expense of the Fund.
Any services performed by Declaration under this Agreement will conform to the
requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended, and
any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Articles of Incorporation and the by-laws of the
Fund, as amended from time to time and delivered to Declaration;
(d) any policies and determinations of the Board of Directors of the Fund which
are communicated to Declaration; and
(e) the policies of the Fund as reflected in the Fund's registration statement
as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent Declaration or any officer thereof from
providing the same or comparable services for or with any other person, firm or
corporation. While the services supplied to the Fund may be different than those
supplied to other persons, firms or corporations, Declaration will provide the
Fund equitable treatment in supplying services. The Fund recognizes that it will
not receive preferential treatment from Declaration as compared with the
treatment provided to other Declaration clients.
Section 2. Duties and Obligations of Declaration.
Subject to the provisions of this Agreement, Declaration will provide to the
Fund the specific services as set forth in Schedule "A" attached hereto.
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Section 3. Definitions. For purposes of this Agreement:
"Certificate" will mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement. To be effective, such
Certificate shall be given to and received by the custodian and shall be
signed on behalf of the Fund by any two of its designated officers, and the
term Certificate shall also include instructions communicated to the
custodian by Declaration.
"Custodian" will refer to that agent which provides safekeeping of the
assets of the Fund.
"Instructions" will mean communications containing instructions transmitted
by electronic or telecommunications media including, but not limited to,
Industry Standardization for Institutional Trade Communications,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an officer or unsigned) and tested
telex.
"Oral Instruction" will mean an authorization, instruction, approval, item
or set of data, or information of any kind transmitted to Declaration in
person or by telephone, telegram, telecopy or other mechanical or
documentary means lacking original signature, by a person or persons
reasonably identified to Declaration to be a person or persons so
authorized by a resolution of the Board of Directors of the Fund to give
Oral Instructions to Declaration on behalf of the Fund.
"Shareholders" will mean the registered owners of the shares of the Fund in
accordance with the share registry records maintained by Declaration for
the Fund.
"Shares" will mean the issued and outstanding shares of the Fund.
"Signature Guarantee" will mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. Broker-dealers guaranteeing signatures must be
members of a clearing corporation or maintain net capital of at least
$100,000. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
"Written Instruction" will mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Declaration
in an original writing containing an original signature or a copy of such
document transmitted by telecopy including transmission of such signature
reasonably identified to Declaration to be the signature of a person or
persons so authorized by a resolution of the Board of Directors of the
Fund, or so identified by the Fund to give Written Instructions to
Declaration on behalf of the Fund.
Concerning Oral and Written Instructions For all purposes under this
Agreement, Declaration is authorized to act upon receipt of the first of
any Written or Oral Instruction it receives from the Fund or its agents. In
cases where the first instruction is an Oral Instruction that is not in the
form of a document or written record, a confirmatory Written Instruction or
Oral Instruction in the form of a document or written record shall be
delivered. In cases where Declaration receives an Instruction, whether
Written or Oral, to enter a portfolio transaction onto the Fund's records,
the Fund shall cause the broker/dealer executing such transaction to send a
written confirmation to the Custodian.
Declaration shall be entitled to rely on the first Instruction received. For any
act or omission undertaken by Declaration in compliance therewith, it shall be
free of liability and fully indemnified and held harmless by the Fund, provided
however, that in the event a Written or Oral Instruction received by Declaration
is countermanded by a subsequent Written or Oral Instruction received prior to
acting upon such countermanded Instruction, Declaration shall act upon such
subsequent Written or Oral Instruction. The sole obligation of Declaration with
respect to any follow-up or confirmatory Written Instruction or Oral Instruction
in documentary or written form shall be to make reasonable efforts to detect any
such discrepancy between the original Instruction and such confirmation and to
report such discrepancy to the Fund. The Fund shall be responsible and bear the
expense of its taking any action, including any reprocessing, necessary to
correct any discrepancy or error. To the extent such action requires Declaration
to act, the Fund shall give Declaration specific Written Instruction as to the
action required. The Fund will file with Declaration a certified copy of each
resolution of the Fund's Board of Directors authorizing execution of Written
Instructions or the transmittal of Oral Instructions as provided above.
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Section 4. Indemnification.
(a) Declaration, its directors, officers, employees, shareholders, and agents
will be liable for any loss suffered by the Fund resulting from the willful
misfeasance, bad faith, gross negligence or reckless disregard on the part
of Declaration in the performance of its obligations and duties under this
Agreement.
(b) Any director, officer, employee, shareholder or agent of Declaration, who
may be or become an officer, director, employee or agent of the Fund, will
be deemed, when rendering services to the Fund, or acting on any business
of the Fund (other than services or business in connection with
Declaration' duties hereunder), to be rendering such services to or acting
solely for the Fund and not as a director, officer, employee, shareholder
or agent of, or under the control or direction of Declaration even though
such person may be receiving compensation from Declaration.
(c) The Fund agrees to indemnify and hold Declaration harmless, together with
its directors, officers, employees, shareholders and agents from and
against any and all claims, demands, expenses and liabilities (whether with
or without basis in fact or law) of any and every nature which Declaration
may sustain or incur or which may be asserted against Declaration by any
person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Declaration except claims,
demands, expenses and liabilities arising from willful misfeasance,
bad faith, negligence or reckless disregard on the part of
Declaration in the performance of its obligations and duties under
this Agreement; or
(ii) any action taken or omitted to be taken by Declaration in reliance
upon any Certificate, instrument, order or stock certificate or other
document reasonably believed by Declaration to be genuine and signed,
countersigned or executed by any duly authorized person, upon the
Oral Instructions or Written Instructions of an authorized person of
the Fund, or upon the written opinion of legal counsel for the Fund
or Declaration; or
(iii) the offer or sale of shares of the Fund to any person, natural or
otherwise, which is in violation of any state or federal law.
If a claim is made against Declaration as to which Declaration may seek
indemnity under this Section, Declaration will notify the Fund promptly
after receipt of any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and will notify the
Fund promptly of any action commenced against Declaration within ten (10)
days after Declaration has been served with a summons or other legal
process. Failure to notify the Fund will not, however, relieve the Fund
from any liability which it may have on account of the indemnity under this
Section so long as the Fund has not been prejudiced in any material respect
by such failure.
The Fund and Declaration will cooperate in the control of the defense of
any action, suit or proceeding in which Declaration is involved and for
which indemnity is being provided by the Fund to Declaration. The Fund may
negotiate the settlement of any action, suit or proceeding subject to
Declaration's approval, which will not be unreasonably withheld.
Declaration reserves the right, but not the obligation, to participate in
the defense or settlement of a claim, action or proceeding with its own
counsel. Costs or expenses incurred by Declaration in connection with, or
as a result of such participation, will be borne solely by the Fund if:
(i) Declaration has received an opinion of counsel from counsel to the
Fund stating that the use of counsel to the Fund by Declaration would
present an impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both Declaration and the Fund, and legal counsel to
Declaration has reasonably concluded that there are legal defenses
available to it which are different from or additional to those
available to the Fund or which may be adverse to or inconsistent with
defenses available to the Fund (in which case the Fund will not have
the right to direct the defense of such action on behalf of
Declaration); or
(iii) the Fund authorizes Declaration to employ separate counsel at the
expense of the Fund.
(d) The terms of this Section will survive the termination of this Agreement.
Section 5. Representations and Warranties.
(a) Declaration represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of Pennsylvania;
(ii) it is empowered under applicable laws and by its Certificate of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to authorize
Declaration to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities, personnel
and equipment required to fully perform its duties and obligations
hereunder;
(v) no legal or administrative proceedings have been instituted or
threatened which would impair Declaration's ability to perform its
duties and obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of
Declaration or any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act;
(viii)this Agreement has been duly authorized by Declaration and, when
executed and delivered, will constitute valid, legal and binding
obligation of Declaration, enforceable in accordance with its terms.
(b) The Fund represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of the State of Maryland;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the Fund to
enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its
duties and obligations under this Agreement;
(v) the Fund's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligations of the Fund, or any law or regulation applicable to
either;
(vi) the Shares are properly registered or otherwise authorized for
issuance and sale;
(vii) this Agreement has been duly authorized by the Fund and, when
executed and delivered, will constitute valid, legal and binding
obligation of the Fund, enforceable in accordance with its terms.
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(c) The Adviser represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of the State of Vermont;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the Adviser to
enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Adviser's ability to perform its
duties and obligations under this Agreement;
(v) the Adviser's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligations of the Adviser, or any law or regulation applicable to
either;
(vi) this Agreement has been duly authorized by the Adviser and, when
executed and delivered, will constitute valid, legal and binding
obligation of the Adviser, enforceable in accordance with its terms.
(d) Delivery of Documents
The Fund will furnish or cause to be furnished to Declaration the following
documents;
(i) current Prospectus and Statement of Additional Information;
(ii) most recent Annual Report;
(iii) most recent Semi-Annual Report for registered investment companies on
Form N-SAR;
(iv) certified copies of resolutions of the Fund's Board of Directors
authorizing the execution of Written Instructions or the transmittal
of Oral Instructions and those persons authorized to give those
Instructions.
(e) Record Keeping and Other Information
Declaration will create and maintain all records required of it pursuant to its
duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Fund and will be
available during regular business hours for inspection, copying and use by the
Fund. Where applicable, such records will be maintained by Declaration for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, Declaration will deliver all such records to the Fund or such
person as the Fund may designate.
In case of any request or demand for the inspection of the Share records of the
Fund, Declaration shall notify the Fund and secure instructions as to permitting
or refusing such inspection. Declaration may, however, exhibit such records to
any person in any case where it is advised by its counsel that it may be held
liable for failure to do so.
Section 6. Compensation.
The Adviser agrees to pay Declaration compensation for its services, and to
reimburse it for expenses at the rates, times, manner and amounts as set forth
in Schedule "B" attached hereto and incorporated herein by reference and as will
be set forth in any amendments to such Schedule "B" agreed upon in writing by
the Parties.
Upon receipt of an invoice therefor, the Adviser agrees to pay such fees within
ten (10) business days. In addition, the Adviser agrees to reimburse Declaration
for any out-of-pocket expenses paid by Declaration on behalf of the Fund within
ten (10) calendar days of the Fund's receipt of an invoice therefor. In the
event Adviser is unable to pay such invoices for services or out- of- pocket
expenses, for any reason, the Fund agrees to pay Declaration the full amount(s)
due within ten (10) additional business days.
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For the purpose of determining fees payable to Declaration, the value of the
Fund's net assets will be computed at the times and in the manner specified in
the Fund's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Fund seek services or functions in
addition to those outlined below or in Schedule "A" attached hereto, a written
amendment to this Agreement specifying the additional services and corresponding
compensation will be executed by the Parties.
In the event that Adviser is more than thirty (30) days delinquent in its
payments of monthly xxxxxxxx in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty (30) days' written notice by
Declaration. The Adviser must notify Declaration in writing of any contested
amounts within ten (10) days of receipt of a billing for such amounts. Disputed
amounts are not due and payable while they are being disputed.
Section 7. Days of Operation.
Nothing contained in this Agreement is intended to or will require Declaration,
in any capacity hereunder, to perform any functions or duties on any holiday,
day of special observance or any other day on which the New York Stock Exchange
("NYSE") is closed. Functions or duties normally scheduled to be performed on
such days will be performed on and as of the next succeeding business day on
which the NYSE is open. Notwithstanding the foregoing, Declaration will compute
the net asset value of the Fund on each day required pursuant to Rule 22c-1
promulgated under the Act.
Section 8. Acts of God, etc.
Declaration will not be liable or responsible for delays or errors caused by
acts of God or by reason of circumstances beyond its control including, acts of
civil or military authority, national emergencies, labor difficulties,
mechanical breakdown, insurrection, war, riots, or failure or unavailability of
transportation, communication or power supply, fire, flood or other catastrophe.
In the event of equipment failures beyond Declaration's control, Declaration
will, at no additional expense to the Fund, take reasonable steps to minimize
service interruptions but will have no liability with respect thereto. The
foregoing obligation will not extend to computer terminals located outside of
premises maintained by Declaration. Declaration has entered into and maintains
in effect agreements making reasonable provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
Section 9. Inspection and Ownership of Records.
In the event of a request or demand for the inspection of the records of the
Fund, Declaration will use its best efforts to notify the Fund and to secure
instructions as to permitting or refusing such inspection. Declaration may,
however, make such records available for inspection to any person in any case
where it is advised in writing by its counsel that it may be held liable for
failure to do so after notice to the Fund.
Declaration recognizes that the records it maintains for the Fund are the
property of the Fund and will be surrendered to the Fund upon written notice to
Declaration as outlined under Section 10(c) below. The Fund is responsible for
the payment in advance of any fees owed to Declaration. Declaration agrees to
maintain the records and all other information of the Fund in a confidential
manner and will not use such information for any purpose other than the
performance of Declaration' duties under this Agreement.
Section 10. Duration and Termination.
(a) The initial term of this Agreement will be for the period of two (2) years,
commencing on the date hereinabove first written (the "Effective Date") and
will continue thereafter subject to termination by either Party as set
forth in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be fixed
for the initial term commencing on the Effective Date of this Agreement and
will continue thereafter subject to their review and any adjustment.
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(c) After the initial term of this Agreement, a Party may give written notice
to the other (the day on which the notice is received by the Party against
which the notice is made shall be the "Notice Date") of a date on which
this Agreement shall be terminated ("Termination Date"). The Termination
Date shall be set on a day not less than ninety (90) days after the Notice
Date. The period of time between the Notice Date and the Termination Date
is hereby identified as the "Notice Period". Any time up to, but not later
than fifteen (15) days prior to the Termination Date, the Adviser or the
Fund will pay to Declaration such compensation as may be due as of the
Termination Date and will likewise reimburse Declaration for any
out-of-pocket expenses and disbursements reasonably incurred or expected to
be incurred by Declaration up to and including the Termination Date.
(d) In connection with the termination of this Agreement, if a successor to any
of Declaration' duties or responsibilities under this Agreement is
designated by the Fund by written notice to Declaration, Declaration will
promptly, on the Termination Date and upon receipt by Declaration of any
payments owed to it as set forth in Section 10(c) above, transfer to the
successor, at the Adviser's expense, all records which belong to the Fund
and will provide appropriate, reasonable and professional cooperation in
transferring such records to the named successor.
(e) Should the Fund desire to move any of the services outlined in this
Agreement to a successor service provider prior to the Termination Date,
Declaration shall make a good faith effort to facilitate the conversion on
such prior date, however, there can be no guarantee that Declaration will
be able to facilitate a conversion of services prior to the end of the
Notice Period. Should services be converted to a successor service provider
prior to the end of the Notice Period, or if the Fund is liquidated or its
assets merged or purchased or the like with another entity, payment of fees
to Declaration shall be accelerated to a date prior to the conversion or
termination of services and calculated as if the services had remained at
Declaration until the expiration of the Notice Period and shall be
calculated at the asset levels on the Notice Date.
(f) Notwithstanding any other provisions of Paragraph 10, in the event the Fund
deregisters as an Investment Company with the United States Securities and
Exchange Commission ("SEC"), this Agreement may be terminated by the Fund
upon ninety (90) days written notice to Declaration. The Termination Date
shall be ninety (90) days after the receipt of such notice by Declaration.
Any time up to, but not later than fifteen (15) days prior to the
Termination Date, the Adviser or the Fund will pay to Declaration such
compensation as may be due as of the Termination Date and will likewise
reimburse Declaration for any out- of- pocket expenses and disbursements
reasonably incurred or expected to be incurred by Declaration up to and
including the Termination Date.
(g) Notwithstanding the foregoing, this Agreement may be terminated at any time
by either Party in the event of a material breach by the other Party
involving negligence, willful misfeasance, bad faith or a reckless
disregard of its obligations and duties under this Agreement provided that
such breach shall have remained unremedied for sixty (60) days or more
after receipt of written specification thereof.
Section 11. Rights of Ownership.
All computer programs and procedures developed to perform services required to
be provided by Declaration under this Agreement are the property of Declaration.
All records and other data except such computer programs and procedures are the
exclusive property of the Fund and all such other records and data will be
furnished to the Fund in appropriate form as soon as practicable after
termination of this Agreement for any reason.
Section 12. Amendments to Documents.
The Fund will furnish Declaration written copies of any amendments to, or
changes in, the Articles of Incorporation, by-laws, Prospectus or Statement of
Additional Information in a reasonable time prior to such amendments or changes
becoming effective. In addition, the Fund agrees that no amendments will be made
to the Prospectus or Statement of Additional Information of the Fund which might
have the effect of changing the procedures employed by Declaration in providing
the services agreed to hereunder or which amendment might affect the duties of
Declaration hereunder unless the Fund first obtains Declaration' approval of
such amendments or changes.
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Section 13. Confidentiality.
Both Parties hereto agree that any non-public information obtained hereunder
concerning the other Party is confidential and may not be disclosed to any other
person without the consent of the other Party, except as may be required by
applicable law or at the request of the U.S. Securities and Exchange Commission
or other governmental agency. Declaration agrees that it will not use any
non-public information for any purpose other than performance of its duties or
obligations hereunder. The obligations of the Parties under this Section will
survive the termination of this Agreement. The Parties further agree that a
breach of this Section would irreparably damage the other Party and accordingly
agree that each of them is entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of this provision.
Section 14. Notices.
Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
If to the Fund: If to the Adviser: If to the Distributor:
Optimal Funds, Inc. LIMCO Declaration Distributors, Inc.
000 X XX Xxxxx 00 000 X XX Xxxxx 15 000 Xxxxx Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000 Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxx Xxxxxxxx X. Xxxxxxx Attn: Xxxxxxx X. Xxxxx
President President Chief Executive Offficer
Section 15. Amendment.
No provision of this Agreement may be amended or modified in any manner except
by a written agreement properly authorized and executed by the Parties. This
Agreement may be amended from time to time by supplemental agreement executed by
the Parties and the compensation stated in Schedule "B" attached hereto may be
adjusted accordingly as mutually agreed upon.
Section 16. Authorization.
The Parties represent and warrant to each other that the execution and delivery
of this Agreement by the undersigned officer of each Party has been duly and
validly authorized; and when duly executed, this Agreement will constitute a
valid and legally binding enforceable obligation of each Party.
Section 17. Counterparts.
This Agreement may be executed in two or more counterparts, each of which when
so executed will be deemed to be an original, but such counterparts will
together constitute but one and the same instrument.
Section 18. Assignment.
This Agreement will extend to and be binding upon the Parties hereto and their
respective successors and assigns; provided, however, that this Agreement will
not be assignable by any of the parties without the written consent of the other
parties, which consents shall be authorized or approved by a resolution by its
respective Boards of Directors.
Section 19. Governing Law.
This Agreement will be governed by the laws of the State of Pennsylvania.
Section 20. Severability.
If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions will be considered severable and not be affected and the rights and
obligations of the parties will be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid, provided that the basic agreement is not thereby materially impaired.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting of
twenty (20) typewritten pages, together with Schedules "X," "X" and "C" (Pages
14-21, attached), to be signed by their duly authorized officers as of the day
and year first above written.
Optimal Funds, Inc. Declaration Service Leveraged Index Management
Company Company
------------------- ------------------ --------------------------
By: Xxxxxxxx X. Xxxxxxx By: Xxxxxxx X. Xxxxx By: Xxxxxxxx X. Xxxxxxx
President Chief Executive Officer President
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SCHEDULE A
Accounting Services Provided by Declaration Service Company
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o Journalize each Portfolio's investment, capital share and income and expense
activities.
o Verify investment buy/sell trade tickets when received from the adviser and
transmit trades to the Fund's custodian for proper settlement.
o Maintain individual ledgers for investment securities.
o Maintain historical tax lots for each security.
o Reconcile cash and investment balances of each Portfolio with the custodian,
and provide the adviser with the beginning cash balance available for
investment purposes.
o Update the cash availability throughout the day as required by the adviser.
o Post to and prepare each Portfolio's Statement of Assets and Liabilities and
Statement of Operations.
o Calculate expenses payable pursuant to the Fund's various contractual
obligations.
o Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund.
o Calculate capital gains and losses.
o Determine each Portfolio's net income.
o At the Portfolio's expense, obtain security market prices or if such market
prices are not readily available, then obtain such prices from services
approved by the adviser, and in either case calculate the market or fair
value of each Portfolio's investments.
o Where applicable, calculate the amortized cost value of debt instruments.
o Transmit or mail a copy of the portfolio valuations to the adviser.
o Compute the net asset value of each Portfolio.
o Report applicable net asset value and performance data to performance
tracking organizations.
o Compute each Portfolio's yields, total returns, expense ratios and portfolio
turnover rate.
o Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments.
o Prepare monthly financial statements, which will include, without limitation,
the Schedule of Investments, the Statement of Assets and Liabilities, the
Statement of Operations, the Statement of Changes in Net Assets, the Cash
Statement, and the Schedule of Capital Gains and Losses.
o Prepare monthly security transactions listings.
o Prepare monthly broker security transactions summaries.
o Supply various Fund and Portfolio statistical data as requested on an ongoing
basis.
o Assist in the preparation of support schedules necessary for completion of
Federal and state tax returns.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports with the SEC on Form N-SAR.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports to shareholders and proxy statements.
o Assist with the preparation of amendments to the Fund's Registration
Statements on From N-1A and other filings relating to the registration of
shares.
o Monitor each Portfolio's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended from time to
time ("Code").
o Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the qualification
as a regulated investment company of each Portfolio of the Fund under the
Code.
o Provide other accounting services as may be agreed upon from time to time in
writing by the Fund and Declaration.
Administrative Services Provided by Declaration Service Company
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o Provide overall day-to-day Fund administrative management, including
coordination of investment adviser, custodian, transfer agency, distribution
and pricing and accounting services.
o Preparation and filing of all Federal and State reports including:
o Fund's post-effective amendments under the Securities Act of 1933 and the
Investment Company Act of 1940.
o Form N-SAR - Semi-Annual report for Registered Investment Companies.
o The Fund's Annual and Semi-Annual Report.
o Rule 24f-2 Notice - filing regarding sale(s) of securities.
o Rule 17g-1 filing with the SEC regarding Fidelity Bond coverage.
o Ongoing monitoring and filing of State Blue Sky registrations.
o Prepare and file such reports, applications and documents as may be necessary
or desirable to register the Fund's shares with the Federal and state
securities authorities, and monitor the sale of Fund shares for compliance
with Federal and state securities laws.
o Prepare and file reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy statements,
proxies and other reports to shareholders.
o Assist with layout and printing of shareholder communications, including
Prospectuses and reports to shareholders.
o Administer contracts on behalf of the Fund with, among others, the Fund's
investment adviser, custodian, transfer agent/shareholder servicing agent,
distributor, and accounting services agent.
o Prepare and maintain materials for directors/management meetings including,
agendas, minutes, attendance records and minute books.
o Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
o Monitor and pay Fund bills, maintain Fund budget and report budget expenses
and variances to Fund management.
o Monitor the Fund's compliance with the investment restrictions and
limitations imposed by the 1940 Act and state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental investment
policies and limitations set forth in the Fund's Prospectuses and Statement
of Additional Information, and the investment restrictions and limitations
necessary for each Portfolio of the Fund to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended,
or any successor statute.
o Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
o Provide administrative services as may be agreed from time to time in writing
by Declaration.
Blue Sky Administration
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o Produce and mail the following required filings:
o Initial Filings - produce all required forms and follow-up on any
comments, including notification of SEC effectiveness.
o Renewals - produce all renewal documents and mail to states, includes
follow-up to ensure all is in order to continue selling in states.
o Sales Reports - produce all the relevant sales reports for the states and
complete necessary documents to properly file sales reports with states.
o Annual Report Filings - file copies of all annual reports with states. o
Prospectus Filings - file all copies of Definitive SAI & Prospectuses with
the states.
o Post-Effective Amendment Filing - file all Post-Effective Amendments with
the states, as well as, any other required documents.
o On demand additional states - complete filing for any states that you would
like to add.
o Amendments to current permits - file in a timely manner any amendment to
registered share amounts.
o Update and file hard copy of all data pertaining to individual permits.
Transfer Agent, Shareholder Servicing Agent and Dividend Disbursing Agent
Services provided by Declaration Service Company
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o Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions automatic
withdrawals, and wire order trades.
o Reinvest or pay dividends and make other distributions.
o Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
o Process and confirm address changes.
o Process standard account record changes as required, i.e. Dividend Codes,
etc.
o Microfilm and/or store source documents for transactions, such as account
applications and correspondence.
o Perform backup withholding for those accounts in accordance with Federal
regulations.
o Solicit missing taxpayer identification numbers.
o Provide remote access inquiry to Fund records via Fund supplied hardware
(fund responsible for connection line and monthly fee).
o Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
o Name and address, including zip code.
o Balance of Shares.
o Number of Shares, issuance date of each share outstanding and cancellation
date of each share no longer outstanding, if issued.
o Balance of dollars available for redemption.
o Dividend code (daily accrual, monthly reinvest, monthly cash or quarterly
cash).
o Type of account code.
o Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
o Original establishment date for accounts opened by exchange.
o W-9 withholding status and periodic reporting.
o State of residence code.
o Social security or taxpayer identification number, and indication of
certification.
o Historical transactions on the account for the most recent 18 months, or
other period as mutually agreed to from time to time.
o Indication as to whether phone transaction can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
o Provide the following reports and statements:
o Prepare daily journals for Fund reflecting all shares and dollar activity
for the previous day.
o Supply information monthly for Fund's preparation of Blue Sky reporting.
o Supply monthly purchase, redemption and liquidation information for use in
Fund's N-SAR report.
o Provide monthly average daily balance reports for the Fund.
o Prepare and mail copies of summary statements to dealers and investment
advisers.
o Mail transaction confirmation statements daily to investors.
o Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably specified
by the Transfer Agent).
o Mail periodic statement to investors.
o Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S.
o Enclose various marketing material as designated by the Fund in statement
mailings, i.e. monthly and quarterly statements (material must be
adaptable to mechanical equipment as reasonably specified by the Transfer
Agent).
o Prepare and mail confirmation statements to dealers daily.
o Prepare certified list of stockholders for proxy mailing.
SCHEDULE B
Compensation Schedule for Services Provided by Declaration Service Company
Per Portfolio
0.20% on first $25 million of average annual assets
0.15% on next $25 million of average annual assets
0.10% on next $50 million of average annual assets
0.075% on next $300 million of average annual assets
0.030% in excess of $400 million of average annual assets
Transfer Agent/ Shareholder Services:
$ 12.00 per Shareholder Account
Minimum annual fees:
Year one (1) $ 60,000
Year two (2) $ 71,000
Year three (3) $ 82,000
Thereafter $ 93,000
Plus out-of-pocket expenses to include, but not limited to: wire fees, Fund/SERV
and Networking fees, bank service charges, printing, copying, postage, courier,
account statement/ confirmation (including programming costs for specialized
statements/ confirmations), portfolio price quotation service, asset allocation
charges, travel, telephone, registration fees, and other standard miscellaneous
items.
Additional classes of shares per portfolio
Each category of fee ( including annual minimums) increases by 50% for the
second class of shares per portfolio, and by 25% for each additional class of
shares per portfolio.
SCHEDULE C
The Optimal Street Funds, Inc.
Portfolios covered by this Agreement:
The Optimal Fund
