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Exhibit B5
MANAGEMENT AGREEMENT
TO: XXXXXX X. XXXXX & CO.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Dear Sirs:
The Fairmont Fund Trust (hereinafter referred to as the "Trust")
herewith confirms our agreement with you as follows:
The Trust has been organized as a business trust under the laws of the
Commonwealth of Kentucky to engage in the business of an investment company. The
Trust currently offers two series of shares to investors, The Fairmont Fund
series and The Warrior Fund series. The Trust's Board of Trustees (the "Board")
has selected you to act as the sole investment adviser of the Trust and to
provide certain other services, as more fully set forth below, and you are
willing to act as such investment adviser and to perform such services under the
terms and conditions hereinafter set forth. Accordingly, the Trust agrees with
you as follows upon the date of the execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Trust with such investment
advice as you in your discretion deem advisable and will furnish a continuous
investment program for the Trust's series consistent with each series'
investment objectives and policies. You will determine the securities to be
purchased for each series' portfolio, the portfolio securities to be held or
sold by each series, and the portion of each series' assets to be held
uninvested, subject always to the provisions of the Trust's Declaration of Trust
and By-Laws and the provisions of the Investment Company Act of 1940; and
subject to the respective series' investment objectives, policies and
restrictions, as each of the same shall be from time to time in effect; and
subject further to such policies and instructions as the Board may from time to
time establish and forward to you in writing. You will advise and assist the
officers of the Trust in taking such steps as are necessary or appropriate to
carry out the decisions of the Board and the appropriate committees of the Board
regarding the conduct of the business of the Trust.
As a registered broker-dealer, you also agree to distribute
the Trust's shares in states in which you are qualified to do so, upon the
request of the Trust. You will accept orders for the purchase of the Trust's
shares at net asset value only, and no sales commission, fee or other charge
will be made to the investor. You will receive no additional compensation for
acting as the Trust's distributor and no portion of your fee hereunder will be
deemed to constitute a distributor's fee or brokerage commission.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay all operating expenses of the Trust, including
the compensation and expenses of any trustees, officers and employees of the
Trust and of any other persons rendering any services to the Trust; clerical and
shareholder service staff salaries; office space and other office expenses; fees
and expenses incurred by the Trust in connection with membership in investment
company organizations; legal, auditing and accounting expenses; expenses of
registering shares under
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federal and state securities laws; insurance expenses; fees and expenses of the
custodian, transfer agent or dividend disbursing agent of the Trust; expenses
including clerical expenses of issue, sale, redemption or repurchase of shares
of the Trust; the cost of preparing and distributing reports and notices to
shareholders; the cost of printing or preparing prospectuses and Statements of
Additional Information for delivery to the Trust's shareholders; the cost of
printing or preparing stock certificates or any other documents, statements or
reports to shareholders; expenses of shareholders' meetings and proxy
solicitations; and all other operating expenses of the Trust not specifically
assumed by the Trust. You will not pay any expenses pursuant to this Agreement
for any activity which is primarily intended to result in the sale or
distribution of Trust shares, although you may make such payments out of your
own resources.
The Trust will pay all brokerage fees and commissions, taxes,
interest, expenses incurred by the Trust in connection with the organization and
registration of shares of any series of the Trust established after the date of
this Agreement, and such extraordinary or non-recurring expenses as may arise,
including litigation to which the Trust may be a party and indemnification of
the Trust's trustees and officers with respect thereto.
3.COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments to be made
as provided in this Agreement, The Fairmont Fund series and The Warrior Fund
series each will pay you, on the last day of each month, a fee at the annual
rate of 2% of the average value of the daily net assets of the series up to and
including $10 million, 1-1/2% of such assets of the series from $10 million to
and including $30 million and 1% of such assets of the series in excess of $30
million. The Trust and you acknowledge that none of this fee is intended to
provide money to you to finance the distribution of the Trust's shares. Your
compensation with respect to each additional series of the Trust established
after the date of this Agreement shall be the fee described above unless the
Board of Trustees, including a majority of the Trustees who are not interested
persons as defined in the Investment Company Act of 1940 of you or the Trust,
determines otherwise. If the Board of Trustees adopts a different fee
arrangement for an additional series, the fee arrangement shall be proved
pursuant to the provisions of section 15 of the Investment Company Act of 1940.
The average value of the daily net assets of a series shall be
determined pursuant to the applicable provisions of the Declaration of Trust of
the Trust or a resolution of the Board, if required. If, pursuant to such
provisions, the determination of net asset value of a series is suspended for
any particular business day, then for the purposes of this paragraph, the value
of the net assets of the series as last determined shall be deemed to be the
value of the net assets as of the close of the business day, or as of such other
time as the value of the series' net assets may lawfully be determined, on that
day. If the determination of net asset value of a series has been suspended for
a period including such month, your compensation payable at the end of such
month shall be computed on the basis of the value of the net assets of the
series as last determined (whether during or prior to such month).
You agree that your compensation during any fiscal year shall
be reduced by an amount, if any, by which the expenses of the Trust or a series
for such fiscal year exceed the lowest applicable expense limitation applicable
to the Trust or the series imposed by state
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securities administrators in states where the series' shares are qualified for
sale, as such limitations may be lowered or raised from time to time. The
payment of your compensation at the end of any month will be reduced or
postponed or, if necessary, a refund made to the Trust or the series as soon as
practicable, so that at no time will there be any accrued but unpaid liability
over the above expense limitation. You shall refund to the Trust or the series
within sixty days after the close of each year, the amount of any additional
reduction of your compensation pursuant to this paragraph, provided, however,
that you will not be required to pay the Trust or the series an amount greater
than the fee paid to you by the Trust or the series in respect of such year
pursuant to this Agreement. As used in this paragraph "expenses" shall mean
those expenses included in the applicable expense limitation having the broadest
specification thereof (certain expenses such as brokerage commissions, if any,
taxes, interest and extraordinary items are excluded from such limitations), and
"expense limitation" means a limit on the maximum annual expenses which may be
incurred by an investment company or a series of an investment company
determined (1) by multiplying a fixed percentage by the average or multiplying
more than one such percentage by different specified amounts of the average of
the values of the net assets of the investment company or the series for a
fiscal year or (2) by multiplying a fixed percentage of the net investment
income of the investment company or percentage of the net investment income of
the investment company or the series for a fiscal year. The words "lowest
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Trust.
4.EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio securities
for the account of the Trust, it is understood that you will arrange for the
placing of all orders for the purchase and sale of portfolio securities for the
Trust's account with brokers or dealers selected by you, subject to review of
this selection by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and portfolio brokerage. In
the selection of such brokers or dealers and the placing of such orders, you are
directed at all times to seek for the Trust the best qualitative execution,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer.
You should generally seek favorable prices and commission
rates that are reasonable in relation to the benefits received. In seeking best
qualitative execution, you are authorized to select brokers or dealers who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Trust and/or the other
accounts over which you exercise investment discretion. You are authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a Trust portfolio transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if you determine in good faith that the amount of the
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker or dealer. The determination may be
viewed in terms of either a particular transaction or your overall
responsibilities with respect to the Trust and to accounts over which you
exercise investment discretion. The Trust and you understand and acknowledge
that, although the information may be useful to the Trust and you, it is not
possible to place a dollar value on such information. It is the Trust's opinion,
as well as your opinion, that the review and study of this information will not
reduce the overall cost
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to you in performing your duties to the Trust under this Agreement. The Board
shall periodically review the commissions paid by the Trust to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits of the Trust.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking best qualitative
execution, you may give consideration to sales of shares of the Trust as a
factor in the selection of brokers and dealers to execute Trust portfolio
transactions.
You may retain compensation in connection with effecting Trust
transactions executed through others, provided that such compensation does not
exceed the lesser of (i) the usual and customary broker's commission for the
transaction or (ii) the maximum amount permitted by the Investment Company Act
of 1940. If any occasion should arise in which you give any investment advice to
your clients concerning Trust shares, you will act solely as investment counsel
for such client and not in any way on behalf of the Trust. Your services to the
Trust pursuant to this Agreement are not to be deemed to be exclusive and it is
understood that you may render investment advice, management and other services
to others, including other registered investment companies.
5.LIMITATION OF LIABILITY OF ADVISER
You (including your officers, directors, employees, control
persons and affiliates of any thereof) shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from your reckless disregard of your obligations
and duties under this Agreement. Any person employed by you who may also be or
become an employee of the Trust shall be deemed, when acting within the scope of
his employment by the Trust, to be acting in such employment solely for the
Trust and not as your employee or agent.
6.DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall remain in force for a period of two (2)
years from the date of its execution with respect to each of the Trust's series
registered for sale in a public offering on the date of such execution and, with
respect to any additional series registered after the date of execution, until
the next anniversary date of the Agreement following the date on which such
series becomes effectively registered for sale in a public offering, and from
year to year thereafter as to each series of the Trust's shares, subject to
annual approval by (i) the Board or (ii) a vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of such
series, provided that in either event continuance is also approved by a majority
of the trustees who are not "interested persons" as defined in the Investment
Company Act of 1940 of you or of the Trust, by a vote cast in person at a
meeting called for the purpose of voting such approval.
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If the shareholders of any series of the Trust's shares fail
to approve the Agreement in the manner set forth above, upon the request of the
Board you will continue to serve or act in such capacity for the series for the
period of time pending required approval of the Agreement, of a new agreement
with you or a different adviser or other definitive action; provided that the
compensation to be paid by the Trust to you for services to and payments on
behalf of the series will be equal to the lesser of your actual costs incurred
in furnishing such services and payments or the amount you would have received
under this Agreement for furnishing such services and payments.
This Agreement may, on sixty days written notice, be
terminated at any time without the payment of any penalty, by the Board, by a
vote of a majority of the outstanding voting securities of the Trust or by you.
This Agreement shall automatically terminate in the event of its assignment.
7.USE OF NAME
The parties hereto acknowledge that all rights to the name
"Fairmont" belong to Xxxxxx X. Xxxxx & Co. and that the Trust is being granted a
limited license to use such word in its Trust name or in any series name. In the
event Xxxxxx X. Xxxxx & Co. ceases to be the adviser to the Trust, the Trust's
right to the use of the name "Fairmont" shall automatically cease on the
thirtieth day following the termination of this Agreement. The right to the name
may also be withdrawn by Xxxxxx X. Xxxxx & Co. during the term of this Agreement
upon thirty (30) days' written notice by it to the Trust. Nothing contained
herein shall impair or diminish in any respect, Xxxxxx X. Xxxxx & Co.'s right to
use the name "Fairmont" in the name of or in connection with any other business
enterprises with which you are or may become associated. There is no charge to
the Trust for the right to use this name.
8.AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this Agreement shall be
effective until approved by vote of the holders of a majority of the outstanding
voting securities of the series to which the amendment relates and by the Board,
including a majority of the Trustees who are not interested persons of you or of
the Trust, cast in person at a meeting called for the purpose of voting on such
approval.
9.LIMITATION OF LIABILITY
The term "THE FAIRMONT FUND TRUST" means and refers to the
Trustees from time to time serving under the Trust's Declaration of Trust as the
same may subsequently thereto have been, or subsequently hereto be, amended. It
is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the Trust property of the
Trust, as provided in a Declaration of Trust of the Trust. The execution and
delivery of this agreement has been authorized by the Trustees and shareholders
of the Trust and signed by the officers of the Trust, acting as such, and
neither such authorization by such
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Trustees and shareholders nor such execution and delivery by such officers shall
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the Trust property of
the Trust as provided in its Declaration of Trust.
10. MISCELLANEOUS
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same Agreement.
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If you are in agreement with the foregoing, please sign the
form of acceptance on the accompanying counterpart of this letter and return
such counterpart to the Trust, whereupon this letter shall become a binding
contract upon the date thereof.
Yours very truly,
THE FAIRMONT FUND TRUST
ATTEST:
/s/ By/s/
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XXXX X. XXXXXXXX, Secretary XXXXX X. XXXXXX, XX., President
Dated as of May 7, 1987
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: XXXXXX X. XXXXX & CO.
/s/ By/s/
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XXXX X. XXXXXXXX, Secretary XXXXXX X. XXXXX, President
Dated as of May 7, 1987
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