EX - 99.(h)(8)
FUND ACCOUNTING AND
BLUE SKY SERVICES AGREEMENT
AGREEMENT made this 25th day of October 2002, between Mercantile Funds,
Inc. (hereinafter referred to as the "Company"), a Maryland corporation having
its principal place of business at Xxx Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000,
and BISYS FUND SERVICES OHIO, INC. (hereinafter referred to as "BISYS"), an Ohio
corporation having its principal place of business at 0000 Xxxxxxx Xxxx,
Xxxxxxxx, Xxxx 00000.
WHEREAS, the Company and BISYS (f/k/a The Winsbury Service Corporation)
entered into a Fund Accounting Agreement dated October 1, 1993 as subsequently
amended (the "1993 Agreement"), whereby BISYS agreed to perform fund accounting
services for the Company, which has continued in effect through the date hereof;
WHEREAS, the Company and BISYS entered into a Blue Sky Services
Agreement dated August 23, 1999 (the "1999 Agreement"), whereby BISYS agreed to
perform services in connection with the registration and qualification of the
Company's shares for sale in the various states, which has continued in effect;
WHEREAS, the Company desires that BISYS continue to perform fund
accounting services and blue sky services for the Company and each investment
portfolio of the Company, as now in existence and listed on Schedule A, or as
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds");
WHEREAS, BISYS is willing to continue to perform such services on the
terms and conditions set forth in this Agreement; and
WHEREAS, BISYS and the Company wish to enter into a new Agreement in
order to set forth the terms and conditions under which BISYS will perform the
services set forth herein for the Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, the Company and BISYS hereby agree as follows:
1. Services as Fund Accountant
1.1 Maintenance of Books and Records. BISYS will keep and maintain the
following books and records of each Fund pursuant to Rule 31a-1 (the "Rule")
under the Investment Company Act of 1940, as amended (the "1940 Act"):
(a) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and
disbursements of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(b) General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including
interest accrued and interest received, as required by
subsection (b)(2)(i) of the Rule;
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(c) Separate ledger accounts as required by subsections (b)(2)(ii)
and (iii) of the Rule; and
(d) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the
Rule.
1.2 Performance of Daily Accounting Services. In addition to the
maintenance of the books and records specified above, BISYS shall perform the
following accounting services daily for each Fund:
(a) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection 1(b)(ii)
below;
(b) Obtain security prices from independent pricing services, or if
such quotes are unavailable, then obtain such prices from each
Fund's investment adviser or its designee, as approved by the
Company's Board of Directors (hereafter referred to as the
"Board");
(c) Verify and reconcile with the Funds' custodians all daily trade
activity and cash on a daily basis, and securities positions on
a weekly basis;
(d) Compute, as appropriate, each Fund's net income and capital
gains, dividend payables, dividend factors, standard yields
(7-day yields, 7-day effective yields, 30-day yields) and other
yields as requested, total return data, portfolio turnover and
weighted average maturity;
(e) Review daily the net asset value calculation and dividend factor
(if any) for each Fund prior to release to shareholders, check
and confirm the net asset values and dividend factors for
reasonableness and deviations, and distribute net asset values
and yields to NASDAQ;
(f) Report to the Company the daily market pricing of securities in
any money market Funds, with the comparison to the amortized
cost basis;
(g) Determine unrealized appreciation and depreciation on securities
held in variable net asset value Funds;
(h) Amortize premiums and accrete discounts on securities purchased
at a price other than face value, if requested by the Company;
(i) Update fund accounting system to reflect rate changes, as
received from a Fund's investment adviser, on variable interest
rate instruments;
(j) Post Fund transactions to appropriate categories;
(k) Accrue expenses of each Fund according to instructions received
from the Company's administrator ("Administrator") (BISYS is not
responsible for calculating or monitoring expenses accruals for
the Funds. In addition, in the event that the Company has Funds
which have two or more classes of shares each having different
net asset values or paying different daily dividends, BISYS will
not be responsible for creating the accounting methodology for
the multiple classes of shares, but will, in accordance
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with section 5 hereto, follow the designated methodology in
performing the services under this Agreement);
(l) Determine the outstanding receivables and payables for all (1)
security trades, (2) Fund share transactions and (3) income and
expense accounts;
(m) Provide accounting reports in connection with the Company's
regular annual audit and other audits and examinations by
regulatory authorities;
(n) Provide such periodic reports as the parties shall agree upon,
as set forth in a separate schedule;
(o) Update cash availability throughout the day as mutually agreed
upon between the Company and BISYS;
(p) Calculate before and after tax total returns and report to the
Company; and
(q) Provide various monthly reports to Morningstar, Lipper and
Standard & Poor's, as mutually agreed upon between the Company
and BISYS.
1.3 Special Reports and Services.
(a) BISYS may provide additional special reports upon the request of
the Company or a Fund's investment adviser, which may result in
an additional charge, the amount of which shall be agreed upon
between the parties.
(b) BISYS may provide such other similar services with respect to a
Fund as may be reasonably requested by the Company, which may
result in an additional charge, the amount of which shall be
agreed upon between the parties.
1.4 Additional Accounting Services. BISYS shall also perform the
following additional accounting services for each Fund, without additional
compensation:
(a) Provide monthly a hard copy of the unaudited financial
statements described below, upon request of the Company. The
unaudited financial statements will include the following items:
(A) Unaudited Statement of Assets and Liabilities,
(B) Unaudited Statement of Operations,
(C) Unaudited Statement of Changes in Net Assets, and
(D) Unaudited Condensed Financial Information;
(b) Provide accounting information for the following:
(A) federal and state income tax returns and federal excise
tax returns;
(B) the Company's semi-annual reports with the Securities
and Exchange Commission ("SEC") on Form N-SAR;
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(C) the Company's annual, semi-annual and quarterly (if any)
shareholder reports;
(D) registration statements on Form N-1A and other filings
relating to the registration of shares;
(E) the Administrator's monitoring of the Company's status
as a regulated investment company under Subchapter M of
the Internal Revenue Code, as amended;
(F) annual audit by the Company's auditors; and
(G) examinations performed by the SEC and other regulatory
authorities.
1.5 Blue Sky Administrative Services. Utilizing a data feed containing
gross sales information, BISYS shall prepare such reports, applications and
documents as may be necessary to register the shares of the Funds with state
securities authorities, monitor the sale of shares for compliance with state
securities laws, and file with the appropriate state securities authorities the
registration statements and reports for the Funds and the shares and all
amendments thereto, as may be necessary to register and keep effective the
registration of the Funds and the shares with state securities authorities
(including state securities authorities requested by the Company). In connection
with the foregoing, BISYS shall:
(A) file initial registrations for new funds/portfolios;
(B) file renewal registrations for existing
funds/portfolios;
(C) monitor blue sky fees and conduct fee analysis upon
request;
(D) perform monthly random registration audits and annual
renewal audits;
(E) maintain internal technical support specialist with
responsibility for maintaining the Blue 2 System and
interfacing with the Company's transfer agent when
necessary;
(F) maintain internal 1940 Act attorney with responsibility
for analyzing legal issues related to state registration
and who shall consult with counsel to the Company with
respect to any material legal issues; and
(G) communicate relevant changes in state regulations and
industry proposals.
1.6 Certain Deadlines and Financial Penalties. From time to time, the
Company may propose certain deadlines and financial penalties applicable to
BISYS's provision of services or certain aspects of the services under this
Agreement, and such service standards shall be set forth as Schedule C to this
Agreement. Notwithstanding the effective date of this Agreement, Schedule C may
bear a different effective date, in which case such Schedule shall be in effect
commencing on such effective date and continuing
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for the remaining term of this Agreement or until subsequently amended upon
mutual agreement of the parties. During any period for which Schedule C is
effective, BISYS agrees to perform the relevant Services in accordance with and
otherwise comply with the provisions set forth in Schedule C. However, such
standards, deadlines or financial penalties shall not be used in the
construction of the parties' rights and obligations under other provisions of
this Agreement unless expressly incorporated therein, and any failure by BISYS
to meet a particular deadline or other requirement set forth in Schedule C, or
its determination in a particular instance to pay a financial or other penalty
provided for therein, shall be without prejudice to BISYS and shall not be
construed as an admission or as a waiver of any rights of BISYS under this
Agreement, except as expressly provided in Section 6 of this Agreement.
2. Subcontracting
BISYS may, in its discretion, utilize agents in its performance of
services under this Agreement. In addition, BISYS may, with not less than 30
days' advance written notice to the Company, appoint in writing other parties
qualified to perform fund accounting reasonably acceptable to the Company (each,
a "Sub-Fund Accountant") to carry out some or all of its responsibilities under
this Agreement with respect to a Fund; provided, however, that the Sub-Fund
Accountant shall be the agent of BISYS and not the agent of the Company or such
Fund, and that BISYS shall not be relieved of any of its duties and obligations
under this Agreement by the appointment of such Sub-Fund Accountant. BISYS shall
be responsible, to the extent provided in Section 5 hereof, for all acts of any
agent or Sub-Fund Accountant as if such acts were its own. Unless the Company
otherwise agrees, it shall not be responsible for any additional fees or charges
as a result of BISYS's use of agents or appointment of a Sub-Fund Accountant
beyond the compensation BISYS would be entitled to hereunder if BISYS performed
such services itself.
3. Compensation
The Company shall pay BISYS compensation for the services to be provided
by BISYS under this Agreement in accordance with, and in the manner set forth in
Schedule B attached hereto.
4. Reimbursement of Expenses and Miscellaneous Service Fees.
4.1 In addition to paying BISYS the compensation described in Section 3
above and Schedule B hereto, the Company agrees to reimburse BISYS for its
reasonable out-of-pocket expenses in providing services hereunder, including
without limitation the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Company;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Company, the Company's investment adviser
or custodian, dealers or others as required for BISYS to perform
the services to be provided hereunder;
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(c) The cost of microfilm or microfiche of records or other
materials;
(d) All systems-related expenses associated with the provision of
special reports and services pursuant to Section 1(c) above;
(e) Any expenses BISYS shall incur at the written direction of an
officer of the Company (other than an officer who is also an
employee of BISYS) thereunto duly authorized; and
(f) Any additional expenses reasonably incurred by BISYS in the
performance of its duties and obligations under this Agreement
(but not including any amounts related to pricing information,
other than as provided in subsection 4(b)(iii) below).
4.2 In addition, BISYS shall be entitled to receive the following
amounts:
(a) Systems development fees billed at an hourly rate of $150 per
hour, as approved by the Company;
(b) Ad hoc reporting fees billed at an agreed upon rate; and
(c) Charges for the pricing information obtained from third party
vendors for use in pricing the securities of each Fund's
portfolio pursuant to subsection 1(b)(ii) above, which shall not
exceed the amounts that would be incurred if the Fund were to
obtain the information directly from the relevant vendor or
vendors.
5. Standard of Care; Uncontrollable Events; Limitation of Liability.
BISYS shall use reasonable professional diligence to ensure the accuracy
of all services performed under this Agreement, but shall not be liable to the
Company for any action taken or omitted by BISYS in the absence of bad faith,
willful misfeasance, negligence or reckless disregard by it of its obligations
and duties. The duties of BISYS shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against BISYS
hereunder.
BISYS shall maintain adequate and reliable computer and other equipment
necessary or appropriate to carry out its obligations under this Agreement. Upon
the Company's reasonable request, BISYS shall provide supplemental information
concerning the aspects of its disaster recovery and business continuity plan
that are relevant to the services provided hereunder. Notwithstanding the
foregoing or any other provision of this Agreement, BISYS assumes no
responsibility hereunder, and shall not be liable for, any damage, loss of data,
delay or any other loss whatsoever caused by events beyond its reasonable
control. Events beyond BISYS's reasonable control include, without limitation,
force majeure events. Force majeure events include natural disasters, actions or
decrees of governmental bodies, and communication lines failures that are not
the fault of either party. In the event of force majeure, computer or other
equipment failures or other events beyond its reasonable control, BISYS shall
follow applicable procedures in its disaster recovery and business continuity
plan and use all commercially reasonable efforts to minimize any service
interruption.
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BISYS shall provide the Company, at such times as the Company may
reasonably require, copies of reports rendered by independent public accountants
on the internal controls and procedures of BISYS relating to the services
provided by BISYS under this Agreement.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL BISYS, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR EXEMPLARY, PUNITIVE, SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS, EACH OF WHICH IS
HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES
WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
6. Term
Notwithstanding the date on which this Agreement is executed, the
Company and BISYS agree that this Agreement shall be effective as of October 1,
2002 ("Effective Date") and shall continue in effect for two (2) years from such
date, until September 30, 2004 (the "Initial Term"). Thereafter, unless
otherwise terminated as provided herein, this Agreement shall be renewed
automatically for successive one (1) year periods ("Rollover Periods"). This
Agreement may be terminated only (i) by provision of a notice of non-renewal in
the manner set forth below, (ii) by mutual agreement of the parties or (iii) for
"cause," as defined below, upon the provision of sixty (60) days advance written
notice by the party alleging cause. Written notice of non-renewal must be
provided at least ninety (90) days prior to the end of the Initial Term or any
Rollover Period, as the case may be.
For purposes of this Agreement, "cause" shall mean (a) a material breach
of this Agreement that has not been remedied for thirty (30) days following
written notice of such breach from the non-breaching party; (b) as relates to
the obligations of BISYS, a "Service Standard Deficiency," as defined in
Schedule C hereto; (c) a final, unappealable judicial, regulatory or
administrative ruling or order in which the party to be terminated has been
found guilty of criminal or unethical behavior in the conduct of its business;
or (d) financial difficulties on the part of the party to be terminated which
are evidenced by the authorization or commencement of a voluntary case, or
failure to promptly contest an involuntary case, under Title 11 of the United
States Code, as from time to time in effect, or any applicable law, other than
said Title 11, of any jurisdiction relating to the liquidation or reorganization
of debtors or to the modification or alteration of the rights of creditors.
BISYS shall not terminate this Agreement pursuant to clause (a) above based
solely upon the Company's failure to pay an amount to BISYS which is the subject
of a good faith dispute, if (i) the Company is attempting in good faith to
resolve such dispute with as much expediency as may be possible under the
circumstances, and (ii) the Company continues to perform its obligations
hereunder in all other material respects (including paying all fees and expenses
not subject to reasonable dispute hereunder).
In the event of a Service Standard Deficiency, the Company must exercise
its right to terminate within sixty (60) days of receiving a written notice or
report concerning the Service Standard Deficiency. In the event that such right
to terminate is not exercised
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within said sixty (60) day period, such right shall be deemed irrevocably waived
in its entirety.
Notwithstanding the foregoing provisions of this Section 6, following
any termination, in the event that BISYS in fact continues to perform any one or
more of the services contemplated by this Agreement (or any Schedule or exhibit
hereto) with the consent of the Company, the provisions of this Agreement,
including without limitation the provisions dealing with compensation and
indemnification, shall continue in full force and effect. Fees and out-of-pocket
expenses incurred by BISYS but unpaid by the Company upon such termination shall
be immediately due and payable upon and notwithstanding such termination. BISYS
shall be entitled to collect from the Company, in addition to the fees and
disbursements provided by Sections 3 and 4 hereof, the amount of all of BISYS's
reasonable cash disbursements in connection with BISYS's activities in effecting
such termination, including without limitation, the delivery to the Company
and/or its distributor or investment adviser and/or other parties of the
Company's property, records, instruments and documents.
If, for any reason other than (i) non-renewal, (ii) mutual agreement of
the parties or (iii) termination of BISYS for "cause" hereunder, BISYS's
services are terminated hereunder, BISYS is replaced as fund accountant, or if a
third party is added to perform all or a part of the services provided by BISYS
under this Agreement (excluding any Sub-Fund Accountant or agent appointed or
utilized as provided in Section 2 hereof), then the Company shall make a
one-time cash payment, in consideration of the fee structure and services to be
provided under this Agreement and not as a penalty, to BISYS equal to the
balance that would be due BISYS for its services hereunder during the remainder
of the then-current term of this Agreement, assuming for purposes of the
calculation of the one-time payment that the fees that would be earned by BISYS
for each month shall be based upon the average assets of the Funds and
corresponding fees payable to BISYS monthly during the twelve (12) months prior
to the date that BISYS's services are terminated , BISYS is replaced or a third
party is added.
In the event the Company or any Fund is merged into another legal entity
in part or in whole pursuant to any form of business reorganization or is
liquidated in part or in whole prior to the expiration of the then-current term
of this Agreement, the parties acknowledge and agree that the liquidated damages
provision set forth above shall be applicable in those instances in which BISYS
is not retained to provide fund accounting services consistent with this
Agreement, including the number of Funds subject to such services. The one-time
cash payment referenced above shall be due and payable on the day prior to the
first day in which BISYS's services are terminated, BISYS is replaced or a third
party is added.
The parties further acknowledge and agree that, in the event BISYS's
services are terminated, BISYS is replaced, or a third party is added, as set
forth above, (i) a determination of actual damages incurred by BISYS would be
extremely difficult, and (ii) the liquidated damages provision contained herein
is intended to adequately compensate BISYS for damages incurred and is not
intended to constitute any form of penalty.
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7. Indemnification
The Company agrees to indemnify and hold BISYS harmless from and against
any and all claims, demands, actions, suits, judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character (including amounts paid under any indemnification
obligations it has to others) (collectively, "Losses") arising out of or in any
way relating to BISYS's actions taken or omissions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Company or the Company's investment adviser, Administrator
or custodian ; provided that this indemnification shall not apply to actions or
omissions of BISYS in cases of its own bad faith, willful misfeasance,
negligence or reckless disregard by it of its obligations and duties; and
further provided that prior to confessing or settling any claim against it which
may be the subject of this indemnification, BISYS shall give the Company written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of BISYS.
BISYS shall indemnify, defend, and hold the Company harmless from and
against any and all Losses resulting directly and proximately from BISYS's
willful misfeasance, bad faith or negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties hereunder.
The indemnification rights hereunder shall include the right to
reasonable advances of defense expenses in the event of any pending or
threatened litigation with respect to which indemnification hereunder may
ultimately be merited. In order that the indemnification provisions contained
herein shall apply, however, it is understood that if in any case a party may be
asked to indemnify or hold the other party harmless, the indemnifying party
shall be fully and promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that the indemnified party
will use all reasonable care to identify and notify the indemnifying party
promptly concerning any situation which presents or appears likely to present
the probability of such a claim for indemnification against the indemnifying
party, but failure to do so in good faith shall not affect the rights hereunder
except to the extent the indemnifying party is materially prejudiced thereby.
The indemnifying party shall be entitled to participate at its own
expense or, if it so elects, to assume the defense of any suit brought to
enforce any claims subject to this indemnity provision. If the indemnifying
party elects to assume the defense of any such claim, the defense shall be
conducted by counsel chosen by it and reasonably satisfactory to the indemnified
party, whose approval shall not be unreasonably withheld. In the event that the
indemnifying party elects to assume the defense of any suit and retain counsel,
the indemnified party shall bear the fees and expenses of any additional counsel
retained by it. If the indemnifying party does not elect to assume the defense
of a suit, it will reimburse the indemnified party for the reasonable fees and
expenses of any counsel retained by the indemnified party. The indemnity and
defense provisions set forth herein shall indefinitely survive the termination
of this Agreement.
8. Record Retention and Confidentiality
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company or BISYS is, or may be, required to keep and maintain
pursuant to
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any applicable statutes, rules or regulations, including without limitation
Rules 31a-1 and 31a-2 under the 1940 Act, relating to the maintenance of books
and records in connection with the services to be provided hereunder. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by BISYS on behalf of
the Company shall be prepared and maintained at the expense of BISYS, but shall
be the property of the Company and will be surrendered promptly to the Company
on request, and made available for inspection by the Company or by the SEC or
other regulatory authority at reasonable times.
In case of any request or demand for the inspection of such records by
another party, BISYS shall notify the Company and follow the Company's
instructions as to permitting or refusing such inspection; provided that BISYS
may exhibit such records in any case where (i) disclosure is required by law,
(ii) BISYS is advised by counsel that it may incur liability for failure to make
a disclosure, (iii) BISYS is requested to divulge such information by
duly-constituted authorities or court process, or (iv) BISYS is requested to
make a disclosure by the Company. BISYS shall provide the Company with
reasonable advance notice of disclosure pursuant to items (i), (ii) and (iii) of
the previous sentence, to the extent reasonably practicable.
9. Activities of BISYS
The services of BISYS rendered to the Company hereunder are not to be
deemed to be exclusive. BISYS is free to render such services to others and to
have other businesses and interests. It is understood that the directors,
officers, employees and shareholders of the Company are or may be or become
interested in BISYS as shareholders or otherwise, and that partners, directors,
officers and employees of BISYS and its counsel are or may be or become
similarly interested in the Company, and that BISYS may be or become interested
in the Company as a shareholder or otherwise.
10. Reports
BISYS shall furnish to the Company and to its properly authorized
auditors, investment advisers, administrators, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Company
in writing, such reports at such times as prescribed pursuant to the terms and
the conditions of this Agreement to be provided or completed by BISYS, or as
subsequently agreed upon by the parties pursuant to an amendment hereto. The
Company agrees to examine each such report promptly and will report or cause to
be reported any errors or discrepancies therein. In the event that errors or
discrepancies, except such errors and discrepancies as may not reasonably be
expected to be discovered by the recipient after conducting a diligent
examination, are not so reported promptly, a report will for all purposes be
deemed accepted by and binding upon the Company and any other recipient, and
BISYS shall have no liability for errors or discrepancies therein and shall have
no further responsibility with respect to such report.
11. Rights of Ownership
All computer programs and procedures employed or developed by or on
behalf of BISYS at BISYS's expense to perform services required to be provided
by BISYS under this Agreement are the property of BISYS. All records and other
data except such computer programs and procedures are the exclusive property of
the Company and all
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such other records and data shall be furnished to the Company in appropriate
form as soon as practicable after termination of this Agreement for any reason.
12. Return of Records
BISYS may at its option at any time, and shall promptly upon the
Company's demand, turn over to the Company and cease to retain the files,
records and documents created and maintained by BISYS pursuant to this Agreement
that are no longer needed by BISYS in the performance of its services or for its
legal protection. If not so turned over to the Company, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Company unless the Company authorizes in writing the destruction of such
records and documents.
13. Representations and Warranties
13.1 The Company represents and warrants that: (i) as of the opening
of business on the Effective Date of this Agreement each Fund has authorized the
number of shares set forth on Schedule A and has registered an indefinite number
of shares with the SEC, (ii) there has been no change in the authorized shares
or their registration status since the Effective Date and (ii) this Agreement
has been duly authorized by the Company and, when executed and delivered by the
Company, will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
13.2 BISYS represents and warrants that: (1) the various procedures
and systems which BISYS has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Company and BISYS's records, data, equipment facilities and other
property used in the performance of its obligations hereunder are adequate and
that it will make such changes thereto from time to time as are reasonably
required for the secure performance of its obligations hereunder, and (2) this
Agreement has been duly authorized by BISYS and, when executed and delivered by
BISYS, will constitute a legal, valid and binding obligation of BISYS,
enforceable against BISYS in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, ALL REPRESENTATIONS AND
WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY,
SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE
(IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) CONCERNING THE
SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO THE SERVICES PROVIDED UNDER THIS
AGREEMENT BY BISYS ARE COMPLETELY DISCLAIMED.
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14. Insurance
BISYS shall maintain a fidelity bond covering larceny and embezzlement
and an insurance policy with respect to directors and officers errors and
omissions coverage in amounts that are appropriate in light of its duties and
responsibilities hereunder. Upon the request of the Company, BISYS shall provide
evidence that coverage is in place. BISYS shall notify the Company should its
insurance coverage with respect to professional liability or errors and
omissions coverage be canceled. Such notification shall include the date of
cancellation and the reasons therefor. BISYS shall notify the Company of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Company should the total outstanding claims made by BISYS under its insurance
coverage materially impair, or threaten to materially impair, the adequacy of
its coverage.
15. Information Furnished by the Company
The Company has furnished to BISYS the following, as amended and current
as of the effective date of this Agreement:
15.1 A copy of the Articles of Incorporation of the Company and any
amendments thereto, certified by the Maryland State Department of Assessments
and Taxation.
15.2 The Company's By-Laws and any amendments thereto;
15.3 Certified copies of resolutions of the Board covering the
following matters:
(a) Approval of this Agreement and authorization of a specified
officer of the Company to execute and deliver this Agreement and
authorization for specified officers of the Company to instruct
BISYS hereunder; and
(b) Authorization of BISYS to act as fund accountant for the Company
and as an agent of the Company for purposes of any other
services required hereunder.
15.4 A list of the officers of the Company and any other persons (who
may be associated with the Company or its investment advisor or Administrator),
together with specimen signatures of those officers and other persons, who are
authorized to instruct BISYS in all matters.
15.5 Two copies of the Prospectuses and Statements of Additional
Information of each Fund.
16. Information Furnished by BISYS
BISYS has furnished to the Company evidence of the following:
16.1 Approval of this Agreement by BISYS, and authorization of a
specified officer of BISYS to execute and deliver this Agreement;
121
16.2 Authorization of BISYS to act as fund accountant for the Company
and to provide the other services required hereunder.
17. Amendments to Documents
The Company shall furnish BISYS written copies of any amendments to, or
changes in, any of the items referred to in Section 15 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Company agrees
that no amendments will be made to the Prospectuses or Statements of Additional
Information of the Company which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Company
first obtains BISYS's approval of such amendments or changes, which approval
shall not be withheld unreasonably.
18. Legal Advice; Reliance on Prospectuses and Instructions
BISYS may apply to the Company at any time for instructions and may
consult with counsel for the Company and with accountants and other experts with
respect to any matter arising in connection with BISYS's duties hereunder, and
BISYS shall not be liable nor accountable for any action taken or omitted by it
in good faith in accordance with such instruction or with the opinion of such
counsel, accountants or other experts. BISYS shall notify the Company at any
time BISYS believes that it is in need of the advice of counsel (other than
counsel in the regular employ of BISYS or any affiliated companies) with regard
to BISYS's responsibilities and duties pursuant to this Agreement. After so
notifying the Company, BISYS, at its discretion, shall be entitled to seek,
receive and act upon advice of legal counsel of its choosing, such advice to be
at the expense of the Company unless relating to a matter involving BISYS's
willful misfeasance, bad faith, negligence or reckless disregard of BISYS's
responsibilities and duties hereunder, and BISYS shall in no event be liable to
the Company or any Fund or any shareholder or beneficial owner of the Company
for any action reasonably taken pursuant to such advice.
As to the services to be provided hereunder, BISYS may rely conclusively
upon the terms of the Prospectuses and Statements of Additional Information of
the Company relating to the relevant Funds to the extent that such services are
described therein, as well as the minutes of Board meetings (if applicable) and
other records of the Company unless BISYS receives written instructions to the
contrary in a timely manner from the Company.
Also, BISYS shall be protected in acting upon any document which it
reasonably believes to be genuine and to have been signed or presented by the
proper person or persons. BISYS will not be held to have notice of any change of
authority of any officers, employees or agents of the Company until receipt of
written notice thereof from the Company.
19. Compliance with Law
Except for the obligations of BISYS set forth in Section 8 hereof, the
Company assumes full responsibility for the preparation, contents and
distribution of each Prospectus of the Company as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other
122
laws, rules and regulations of governmental authorities having jurisdiction.
Except for the services to be provided by BISYS pursuant to subsection 1(e)
hereof, BISYS shall have no obligation to take cognizance of any laws relating
to the sale of the Company's shares.
20. Notices
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail or by a nationally-recognized overnight delivery
service to the party required to be served with such notice at the following
address: if to the Company, to Xxxx X. Xxxxxxx, President, c/o Mercantile
Capital Advisors, Inc., Xxx Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000; with a
copy to W. Xxxxx XxXxxxxx, Esq., Drinker, Xxxxxx & Xxxxx LLP, One Xxxxx Square,
00xx & Xxxxxx Xxxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000; and if to BISYS, to it
at 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000; Attn: President, or at such other
address as such party may from time to time specify in writing to the other
party pursuant to this Section.
21. Assignment
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
22. Governing Law
This Agreement shall be governed by and provisions shall be construed in
accordance with the laws of the State of Ohio. To the extent that the applicable
laws of the State of Ohio, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
23. Privacy
Nonpublic personal financial information relating to consumers or
customers of the Company provided by or at the direction of the Company to
BISYS, or collected or retained by BISYS to perform its duties hereunder shall
be considered confidential information. BISYS shall not give, sell or in any way
transfer such confidential information to any person or entity, other than
affiliates of BISYS, except at the direction of the Company or as required or
permitted by law. BISYS shall have in place and maintain physical, electronic
and procedural safeguards reasonably designed to protect the security,
confidentiality and integrity of, and to prevent unauthorized access to or use
of records and information relating to consumers or customers of the Company.
The Company represents to BISYS that it has adopted a statement of its privacy
policies and practices as required by the SEC's Regulation S-P and agrees to
provide BISYS with a copy of that statement annually.
24. Miscellaneous
24.1 Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
123
24.2 This Agreement constitutes the complete agreement of the parties
hereto as to the subject matter covered by this Agreement, and supercedes all
prior negotiations, understandings and agreements bearing upon the subject
matter covered herein, including, without limitation, the 1993 Agreement and the
1999 Agreement.
24.3 This Agreement may be executed in counterparts, each of which
shall be an original but all of which, taken together, shall constitute one and
the same agreement.
24.4 No amendment to this Agreement shall be valid unless made in
writing and executed by both parties hereto. The parties hereto may amend such
procedures as may be set forth herein by written agreement as may be appropriate
or practical under the circumstances, and BISYS may conclusively assume that any
special procedure which has been approved by an executive officer of the Company
(other than an officer who is also an employee of BISYS) does not conflict with
or violate any requirements of the Company's Articles of Incorporation, By-Laws
or then-current Prospectuses, or any rule, regulation or requirement of any
regulatory body.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
MERCANTILE FUNDS, INC.
By: /s/Xxxx X. Xxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxx
Title: President
BISYS FUND SERVICES OHIO, INC.
By: /s/Xxxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
124
SCHEDULE A
TO THE FUND ACCOUNTING AND
BLUE SKY SERVICES AGREEMENT
BETWEEN MERCANTILE FUNDS, INC.
AND BISYS FUND SERVICES OHIO, INC.
EFFECTIVE OCTOBER 1, 2002
CLASS/SERIES AUTHORIZED SHARES FUND NAME
------------ ----------------- ---------
Class A Common Stock 1,200,000,000 Prime Money Market Fund
Special Series 1 500,000,000
Special Series 2 500,000,000
Special Series 3 500,000,000
Class B Common Stock 700,000,000 Government Money Market Fund
Special Series 1 500,000,000
Special Series 2 500,000,000
Special Series 3 500,000,000
Class C Common Stock 600,000,000 Tax-Exempt Money Fund
Special Series 1 500,000,000
Special Series 2 500,000,000
Special Series 3 500,000,000
Class E Common Stock 500,000,000 Growth & Income Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
125
Class F Common Stock 500,000,000 Limited Maturity Bond Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Class G Common Stock 400,000,000 Maryland Tax-Exempt Bond Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
126
Class H Common Stock 400,000,000 International Equity Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Class J Common Stock 400,000,000 Diversified Real Estate Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Class K Common Stock 400,000,000 National Tax-Exempt Bond Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Class L Common Stock 400,000,000 Total Return Bond Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Class M Common Stock 400,000,000 Equity Growth Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Class N Common Stock 400,000,000 Equity Income Fund
127
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Class O Common Stock 400,000,000 Intermediate Tax-Exempt Bond
Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Class P Common Stock 400,000,000 Capital Opportunities Fund
Special Series 1 100,000,000
Special Series 2 100,000,000
Special Series 3 100,000,000
Unclassified 5,100,000,000
128
SCHEDULE B
TO THE FUND ACCOUNTING AND
BLUE SKY SERVICES AGREEMENT
BETWEEN MERCANTILE FUNDS, INC.
AND BISYS FUND SERVICES OHIO, INC.
Effective October 1, 2002
Pursuant to Section 3 of the Agreement, BISYS shall be entitled to receive
annual fees as set forth below.
FEES
Fees stated in Basis Points ("bps"), as a percentage of Average Net Assets*
2.75 bps (0.0275%) of assets up to $2.5 billion
2.25 bps (0.025%) of assets from $2.5 billion to $2.8 billion
2.00 bps (0.02%) of assets from $2.8 billion to $3.0 billion
1.75 bps (0.0175%) of assets in excess of $3.0 billion
*Fees are to be applied based on the Company's aggregate average daily net
assets to each of the respective incremental asset levels indicated above.
OUT-OF-POCKET EXPENSES
In addition, BISYS shall be entitled to reimbursement for certain out-of-pocket
expenses and other charges, as set forth in Section 4 of the Agreement.
MULTIPLE CLASSES OF SHARES
In addition to the fees set forth above, for each additional class of shares of
each Fund, there will be an annual fee of $10,000. These fees are to be waived
during the first year of the Initial Term.
129
SCHEDULE C
TO THE FUND ACCOUNTING AND
BLUE SKY SERVICES AGREEMENT
BETWEEN MERCANTILE FUNDS, INC.
AND BISYS FUND SERVICES OHIO, INC.
Effective October 1, 2002
ITEM STANDARD
----- --------
Cash Availability to Portfolio Managers by Accurate and timely 99.5% of time
10:30 am
EST NAV, yield, dividend factor Calculation Accurate 99.5% of time
Accuracy
NAV Distribution to NASDAQ Accurate and timely 99.5% of time
Total Return and After-tax Total Return Accurate and timely 99.5% of time
Calculation Accuracy
Each of the standards shall be measured daily per month and each CUSIP shall be
considered as a separate item. In the event BISYS fails to meet a particular
service standard item set forth above (and its failure is not in whole or in
part due to circumstances beyond its control or any other circumstances under
which BISYS would not be responsible under the Agreement) for any three (3)
months within a consecutive six (6) month period, such failure shall be deemed a
"Service Standard Deficiency."
130
