EX-99.K.4 9 c81555a1exv99wkw4.txt FORM OF SUB-FUND ACCOUNTING SERVICING AGREEMENT EXHIBIT k.4 SUB-FUND ACCOUNTING SERVICING AGREEMENT THIS AGREEMENT is made and entered into as of this ___ day of February, 2004, by and among U.S. BANCORP FUND SERVICES, LLC, a Wisconsin limited liability company ("USBFS") and BRANTLEY MANAGEMENT COMPANY, an Ohio company ("Brantley"). 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, Brantley, pursuant to the Fund Accounting Servicing Agreement ("Fund Accounting Agreement"), is the Company's fund accountant and wishes to delegate some of its responsibilities under the Fund Accounting Agreement to USBFS as sub-fund accountant; WHEREAS, USBFS is, among other things, in the business of providing business development company accounting services to business development companies; and WHEREAS, Brantley and the Company desire to retain USBFS to provide certain sub-accounting services to the Company. 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 USBFS AS SUB-FUND ACCOUNTANT Brantley hereby retains USBFS as sub-fund accountant of the Company on the terms and conditions set forth in this Agreement, and USBFS hereby accepts such position and agrees to perform the services and duties described in Exhibit B attached hereto, as the same may be amended from time to time by the mutual consent of the parties hereto, and as set forth in this Agreement. 2. SERVICES AND DUTIES OF USBFS USBFS 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 Brantley. (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 USBFS 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. (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. 2 (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, Brantley, the Securities and Exchange Commission (the "SEC"), and the outside auditors. (2) Maintain accounting records according to the 1940 Act and regulations provided thereunder. F. USBFS 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. 3 (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, USBFS 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 on USBFS's accounting records and the Company's internal records. 3. PRICING OF SECURITIES For each valuation date, USBFS shall obtain prices from a pricing source selected by USBFS but 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 USBFS 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. 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 USBFS. 5. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC. USBFS 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 Brantley and the Company under this Agreement. 4 6. COMPENSATION USBFS 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 based on services to be performed for the Company by Brantley as compared to services provided by USBFS. Brantley shall pay all fees and reimbursable expenses within thirty (30) calendar days following receipt of the billing notice. Notwithstanding anything to the contrary, amounts owed by Brantley to USBFS shall only be paid out of the assets and property of Brantley and in no event shall the Company be liable for any amounts due under this Agreement. USBFS expressly agrees that it will only look to Brantley for payment of fees and reimbursable expenses under this Agreement. 7. INDEMNIFICATION; LIMITATION OF LIABILITY A. USBFS shall exercise reasonable care in the performance of its duties under this Agreement. USBFS shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Company or Brantley in connection with matters to which this Agreement relates, including losses resulting from mechanical breakdowns or the failure of communication or power supplies beyond USBFS's control, except a loss arising out of or relating to USBFS's 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, Brantley shall indemnify and hold harmless USBFS from and against any and all claims, demands, losses, expenses, and liabilities of any and every nature (including reasonable attorneys' fees) that USBFS may sustain or incur or that may be asserted against USBFS 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 USBFS by any duly authorized officer of Brantley or the Company, such duly authorized officer to be included in a list of authorized officers furnished to USBFS and as amended from time to time in writing by resolution of the Board of Directors of the Company. USBFS shall indemnify and hold Brantley and 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 Brantley and the Company may sustain or incur or that may be asserted against the Company by any person arising out of any action taken or omitted to be taken by USBFS as a result of USBFS's 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, USBFS shall take all reasonable steps to minimize 5 service interruptions for any period that such interruption continues beyond USBFS's control. USBFS 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 USBFS. USBFS agrees that it shall, at all times, have reasonable contingency plans with appropriate parties, making reasonable provision for emergency use of electrical data processing equipment to the extent appropriate equipment is available. Representatives of the Company shall be entitled to inspect USBFS's premises and operating capabilities at any time during regular business hours of USBFS, upon reasonable notice to USBFS. Notwithstanding the above, USBFS 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 USBFS agrees on behalf of itself and its directors, officers, and employees to treat confidentially and as proprietary information of the Company and Brantley all records and other information relative to the Company and Brantley 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 or Brantley, which approval shall not be unreasonably withheld and may not be withheld where USBFS may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Company or Brantley. Further, USBFS will adhere to the privacy policies adopted by the Company pursuant to Title V of the Gramm-Leach-Bliley Act, as may be modified from time to time (the "Act"). Notwithstanding the foregoing, USBFS will not share any nonpublic personal 6 information concerning any of the Company's shareholders to any third party 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 USBFS in Section 7 shall survive the termination of this Agreement. 10. RECORDS USBFS 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 and Brantley, but not inconsistent with the rules and regulations of appropriate government authorities, in particular, Section 31 of the 1940 Act and the rules thereunder. USBFS agrees that all such records prepared or maintained by USBFS relating to the services to be performed by USBFS 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. USBFS agrees to provide Brantley and the Company any records necessary for the Company to comply with its obligations under the Sarbanes-Oxley Act. Without limiting the generality of the foregoing, USBFS shall cooperate with Brantley and the Company and assist Brantley and 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 Wisconsin, without regard to conflicts of law principles. To the extent that the applicable laws of the State of Wisconsin, 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. 12. DUTIES IN THE EVENT OF TERMINATION In the event that, in connection with termination, a successor to any of USBFS's duties or responsibilities hereunder is designated by Brantley by written notice to USBFS, USBFS will promptly, upon such termination and at the expense of Brantley or the Company, 7 transfer to such successor all relevant books, records, correspondence and other data established or maintained by USBFS 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 USBFS's 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 USBFS 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, Brantley or their agent shall furnish to USBFS the data necessary to perform the services described herein at such times and in such form as mutually agreed upon. If USBFS is also acting in another capacity for the Company, nothing herein shall be deemed to relieve USBFS of any of its obligations in such capacity. 15. COMPANY THIRD PARTY BENEFICIARY USBFS agrees that the Company is a third party beneficiary under this Agreement. 16. ASSIGNMENT This Agreement may not be assigned by either party without the prior written consent of the other party. 17. 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 USBFS shall be sent to: U.S. Bancorp Fund Services, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202 8 and notice to Brantley shall be sent to: Brantley Management Company 3201 Enterprise Parkway, Suite 350 Beachwood, Ohio 44122 18. 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. 9 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. BRANTLEY MANAGEMENT COMPANY U.S. BANCORP FUND SERVICES, LLC By: ______________________________ By: ___________________________ Robert P. Pinkas Joe D. Redwine Title: Chief Executive Officer Title: President 10 EXHIBIT A SUB-FUND ACCOUNTING ANNUAL FEE SCHEDULE: $30,000 on the first $100 million 2 basis points on the next $200 million 1 basis point on the balance Extraordinary services - quoted separately Plus out-of-pocket expenses, including but not limited to: Postage, Stationery Programming /customization Retention of records Special reports Federal and state regulatory filing fees Expenses from U.S. Bancorp participation in client meetings Auditing and legal expenses 11 EXHIBIT B