EXHIBIT k.3
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this ___ day of February,
2004, by and among XXXXXXXX MANAGEMENT COMPANY, a Ohio company ("Xxxxxxxx") and
XXXXXXXX MEZZANINE CAPITAL CORP., a Maryland corporation (the "Company").
WHEREAS, Xxxxxxxx wishes to provide certain fund accounting and other
services to the Company;
WHEREAS, the Company is a closed-end investment company which has
elected to be treated as a business development company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and is authorized to issue
shares of common stock;
WHEREAS, the Company desires to retain Xxxxxxxx to provide certain
accounting services to the Company as provided hereunder
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
do hereby agree as follows:
1. APPOINTMENT OF XXXXXXXX AS FUND ACCOUNTANT
The Company hereby appoints Xxxxxxxx as fund accountant of the Company
on the terms and conditions set forth in this Agreement, and Xxxxxxxx
hereby accepts such appointment and agrees to perform (or provide for
performance of) the services and duties set forth in this Agreement.
2. DELEGATION OF DUTIES
Xxxxxxxx may delegate some or all of its duties under this Agreement.
Xxxxxxxx may employ a sub-fund accountant to assist in the performance
of its duties under this Agreement. Such use does not relieve Xxxxxxxx
of any duty or liability it would otherwise have under this Agreement.
Compensation of any such sub-fund accountant for services provided and
expenses incurred under any agreement between Xxxxxxxx and any such
sub-fund accountant permitted under this paragraph is the sole
responsibility of Xxxxxxxx. In the event Xxxxxxxx shall retain a
sub-fund accountant under this paragraph, Xxxxxxxx shall be responsible
for oversight over such sub-fund accountant and will provide such
sub-fund with the assistance necessary for such sub-fund accountant to
provide accountant the applicable services to Company. The decision to
retain or terminate a sub-fund accountant to provide services to the
Company pursuant to this paragraph is in the sole discretion of
Xxxxxxxx.
3. SERVICES AND DUTIES OF XXXXXXXX
Xxxxxxxx shall provide the following fund accounting services for the
Company, including but not limited to:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date+1 (or
other appropriate basis as directed by the Company)
basis using security trade information communicated
from the Adviser or the Company.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Directors of the
Company (the "Board of Directors" or the "Directors")
and apply those prices to the portfolio positions.
For those securities where market quotations are not
readily available, the Board of Directors shall
approve, in good faith, procedures for determining
the fair value for such securities.
(3) Identify interest and dividend accrual balances as of
each valuation date and calculate gross earnings on
investments for the accounting period.
(4) Determine gain/loss on security sales and identify
them as short-term or long-term; account for periodic
distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of
each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense
accrual amounts as directed by the Company as to
methodology, rate or dollar amount.
(2) Record payments for Company expenses upon receipt of
written authorization from Company.
(3) Account for Company expenditures and maintain expense
accrual balances at the level of accounting detail,
as agreed upon by Xxxxxxxx and the Company.
(4) Provide expense accrual and payment reporting.
C. Company Valuation and Financial Reporting Services:
(1) Account for Company dividend reinvestments,
repurchases, tenders, issuances, sales, and other
Company share activity as reported by the Company's
transfer agent on a timely basis.
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(2) Determine net investment income (earnings) for the
Company as of each valuation date. Account for
periodic distributions of earnings to shareholders
and maintain undistributed net investment income
balances as of each valuation date.
(3) Maintain a general ledger and other accounts, books,
and financial records for the Company in the form as
agreed upon.
(4) Determine the net asset value of the Company
according to the accounting policies and procedures
set forth in the Company's prospectus or other
operative documents.
(5) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of
Company operations at such time as required by the
nature and characteristics of the Company.
(6) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as agreed
upon from time to time.
(7) Prepare monthly reports that document the adequacy of
accounting detail to support month-end ledger
balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment
portfolio of the Company to support the tax reporting
required for IRS-defined regulated investment
companies.
(2) Maintain tax lot detail for the Company's investment
portfolio.
(3) Calculate taxable gain/loss on security sales using
the tax lot relief method designated by the Company.
(4) Provide the necessary financial information to
support the taxable components of income and capital
gains distributions to the Company's transfer agent
to support tax reporting to the shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the
Company's accounting records available to the
Company, Xxxxxxxx Capital Management, L.L.C. (the
"Adviser") the Securities and Exchange Commission
(the "SEC"), and the outside auditors.
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(2) Maintain accounting records according to the 1940 Act
and regulations provided thereunder.
X. Xxxxxxxx will perform the following accounting functions on a
daily or otherwise agreed periodic basis:
(1) Reconcile cash and investment balances of the Company
with the Company's custodian, and provide the
Company's investment adviser with the beginning cash
balance available for investment purposes.
(2) Transmit or mail a copy of the portfolio valuation to
the Company's investment adviser.
(3) Review the impact of current period's activity on a
per share basis, and review changes in market value.
G. In addition, Xxxxxxxx will:
(1) Prepare monthly security transactions listings.
(2) Supply various Company and class statistical data as
requested by the Company on an ongoing basis.
(3) Provide a monthly reconciliation between the
Company's cash portfolio as held in Xxxxxxxx'x
accounting record and the Company's internal records.
3. PRICING OF SECURITIES
For each valuation date, Xxxxxxxx shall obtain prices from a pricing
source approved by the Board of Directors and apply those prices to the
portfolio positions of the Company. For those securities where market
quotations are not readily available, the Board of Directors shall
approve, in good faith, procedures for determining the fair value for
such securities.
If the Adviser or the Company desires to provide a price that varies
from the pricing source, the Adviser or the Company shall promptly
notify and supply Xxxxxxxx with the valuation of any such security on
each valuation date. All pricing changes made by the Adviser or the
Company will be in writing and must specifically identify the
securities to be changed by CUSIP (if any), name of security, new price
or rate to be applied, and, if applicable, the time period for which
the new price(s) is/are effective.
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4. CHANGES IN ACCOUNTING PROCEDURES
Any resolution passed by the Board of Directors that affects accounting
practices and procedures under this Agreement shall be effective upon
written receipt and acceptance by Xxxxxxxx.
5. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC.
Xxxxxxxx reserves the right to make changes from time to time, as it
deems advisable, relating to its services, systems, programs, rules,
operating schedules and equipment, so long as such changes do not
adversely affect the service provided to the Company under this
Agreement.
6. COMPENSATION
Xxxxxxxx shall be compensated for providing the services set forth in
this Agreement in accordance with the fee schedule attached hereto as
Exhibit A and as mutually agreed upon and amended from time to time.
The Company shall pay all fees and reimbursable expenses within thirty
(30) calendar days following receipt of the billing notice.
7. INDEMNIFICATION; LIMITATION OF LIABILITY
X. Xxxxxxxx shall exercise reasonable care in the performance of
its duties under this Agreement. Xxxxxxxx shall not be liable
for any error of judgment or mistake of law or for any loss
suffered by the Company in connection with matters to which
this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power
supplies beyond Xxxxxxxx'x control, except a loss arising out
of or relating to Xxxxxxxx'x refusal or failure to comply with
the terms of this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance of its
duties under this Agreement. Notwithstanding any other
provision of this Agreement, the Company shall indemnify and
hold harmless Xxxxxxxx from and against any and all claims,
demands, losses, expenses, and liabilities of any and every
nature (including reasonable attorneys' fees) that Xxxxxxxx
may sustain or incur or that may be asserted against Xxxxxxxx
by any person arising out of any action taken or omitted to be
taken by it in performing the services hereunder (i) in
accordance with the foregoing standards, or (ii) in reliance
upon any written or oral instruction provided to Xxxxxxxx by
any duly authorized officer of the Company, such duly
authorized officer to be included a list of authorized
officers furnished to Xxxxxxxx as amended from to time in
writing by resolution of the Board of Directors of the
Company.
Xxxxxxxx shall indemnify and hold the Company harmless from
and against any and all claims, demands, losses, expenses, and
liabilities of any and every nature (including reasonable
attorneys' fees) that the Company may sustain or incur or that
may be asserted against the Company by any person arising out
of any action
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taken or omitted to be taken by Xxxxxxxx as a result of
Xxxxxxxx'x refusal or failure to comply with the terms of this
Agreement, its bad faith, negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, Xxxxxxxx
shall take all reasonable steps to minimize service
interruptions for any period that such interruption continues
beyond Xxxxxxxx'x control. Xxxxxxxx will make every reasonable
effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of
Xxxxxxxx. Xxxxxxxx agrees that it shall, at all times, have
reasonable contingency plans with appropriate parities, making
reasonable provisions for emergency use of electrical data
processing equipment to the extent appropriate equipment is
available. Representatives of the Company shall be entitled to
inspect Xxxxxxxx'x premises and operating capabilities at any
time during regular business hours of Xxxxxxxx, upon
reasonable notice to Xxxxxxxx.
Notwithstanding the above, Xxxxxxxx reserves the right to
reprocess and correct administrative errors at its own
expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the
indemnitor may be asked to indemnify or hold the indemnitee
harmless, the indemnitor shall be fully and promptly advised
of all pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will use all
reasonable care to notify the indemnitor promptly concerning
any situation that presents or appears likely to present the
probability of a claim for indemnification. The Indemnitor
shall have the option to defend the indemnitee against any
claim that may be the subject of this indemnification. In the
event that the indemnitor so elects, it will so notify the
indemnitee and thereupon the indemnitor shall take over
complete defense of the claim, and the indemnitee shall in
such situation initiate no further legal or other expenses for
which it shall seek indemnification under this section.
Indemnitee shall in no case confess any claim or make any
compromise in any case in which the indemnitor will be asked
to indemnify the indemnitee except with the indemnitor's prior
written consent.
8. PROPRIETARY AND CONFIDENTIAL INFORMATION
Xxxxxxxx agrees on behalf of itself and its directors, officers, and
employees to treat confidentially and as proprietary information of the
Company all records and other information relative to the Company and
prior, present, or potential shareholders of the Company (and clients
of said shareholders), and not to use such records and information for
any purpose other than the performance of its responsibilities and
duties hereunder, except after prior notification to and approval in
writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where Xxxxxxxx may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested
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to divulge such information by duly constituted authorities, or when so
requested by the Company.
Further, Xxxxxxxx will adhere to the privacy policies adopted by the
Company pursuant to Title V of the Xxxxx-Xxxxx-Xxxxxx Act, as may be
modified from time to time (the "Act"). Notwithstanding the foregoing,
Xxxxxxxx will not share any nonpublic personal information concerning
any of the Company's shareholders to any third party (except as
necessary to service providers, such as a sub-fund accountant) unless
specifically directed by the Company or allowed under one of the
exceptions noted under the Act.
9. TERM OF AGREEMENT; AMENDMENT
This Agreement shall become effective as of the date first written
above and, unless sooner terminated as provided herein, shall continue
automatically in effect for successive annual periods. This Agreement
may be terminated by either party upon giving sixty (60) days prior
written notice to the other party or such shorter period as is mutually
agreed upon by the parties. However, this Agreement may be amended by
mutual written consent of the parties. The representations of Xxxxxxxx
in Section 7 hereunder shall survive the termination of this Agreement.
10. RECORDS
Xxxxxxxx shall keep records relating to the services to be performed
hereunder in the form and manner, and for such period, as it may deem
advisable and is agreeable to the Company, but not inconsistent with
the rules and regulations of appropriate government authorities, in
particular, Section 31 of the 1940 Act and the rules thereunder.
Xxxxxxxx agrees that all such records prepared or maintained by
Xxxxxxxx relating to the services to be performed by Xxxxxxxx hereunder
are the property of the Company and will be preserved, maintained, and
made available in accordance with such applicable sections and rules of
the 1940 Act and will be promptly surrendered to the Company on and in
accordance with its request. Xxxxxxxx agrees to provide the Company any
records necessary for the Company to comply with its obligations under
the Xxxxxxxx-Xxxxx Act. Without limiting the generality of the
foregoing, Xxxxxxxx shall cooperate with the Company and assist the
Company as is necessary by providing information to enable the
appropriate officers of the Company to execute any required
certifications, including by providing appropriate back-up certificates
to the officers of the Company in the form reasonably requested by the
Company.
11. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the
State of Ohio, without regard to conflicts of law principles. 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, and nothing herein shall be construed in
a manner inconsistent with the 1940 Act or any rule or order of the SEC
thereunder.
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12. DUTIES IN THE EVENT OF TERMINATION
In the event that, in connection with termination, a successor to any
of Xxxxxxxx'x duties or responsibilities hereunder is designated by the
Company by written notice to Xxxxxxxx, Xxxxxxxx will promptly, upon
such termination and at the expense of the Company, transfer to such
successor all relevant books, records, correspondence and other data
established or maintained by Xxxxxxxx under this Agreement in a form
reasonably acceptable to the Company, and will cooperate in the
transfer of such duties and responsibilities, including provision for
assistance from Xxxxxxxx'x personnel in the establishment of books,
records and other data by such successor.
13. NO AGENCY RELATIONSHIP
Nothing herein contained shall be deemed to authorize or empower
Xxxxxxxx to act as agent for the other party to this Agreement, or to
conduct business in the name, or for the account, of the other party to
this Agreement.
14. DATA NECESSARY TO PERFORM SERVICES
The Company or its agent shall furnish to Xxxxxxxx the data necessary
to perform the services described herein at such times and in such form
as mutually agreed upon. If Xxxxxxxx (or its affiliates) is also acting
in another capacity for the Company, nothing herein shall be deemed to
relieve Xxxxxxxx (or its affiliates) of any of its obligations in such
capacity.
15. ASSIGNMENT
This Agreement may not be assigned by either party without the prior
written consent of the other party.
16. NOTICES
Any notice required or permitted to be given by either party to the
other shall be in writing and shall be deemed to have been given on the
date delivered personally or by courier service, or three (3) days
after sent by registered or certified mail, postage prepaid, return
receipt requested, or on the date sent and confirmed received by
facsimile transmission to the other party's address set forth below:
Notice to Xxxxxxxx shall be sent to:
Xxxxxxxx Management Company
0000 Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxx 00000
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and notice to Company shall be sent to:
Xxxxxxxx Mezzanine Capital Corp.
0000 Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxx 00000
17. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior
agreements, arrangements and understandings, whether written or oral.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by a duly authorized officer on one or more counterparts as of the date first
above written.
XXXXXXXX MANAGEMENT COMPANY XXXXXXXX MEZZANINE CAPITAL CORP.
By: ______________________________ By: ___________________________
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EXHIBIT A
FUND ACCOUNTING SERVICING AGREEMENT ANNUAL FEE SCHEDULE:
$50,000 on the first $100 million
3 basis points on the next $200 million
1.5 basis points on the balance
Extraordinary services - quoted separately
Plus out-of-pocket expenses, including but not limited to:
Postage, Stationery
Programming / customization requested by Company
Retention of records
Special reports
Federal and state regulatory filing fees
Out-of-pocket expenses from participation in client meetings
Auditing and out-of-pocket legal expenses
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