July 22, 0000
XXX-XXXX XXXXX XX XXXXXXX
ADVISORY AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of **********, by and between TAX-
FREE TRUST OF ARIZONA (the "Trust"), a Massachusetts business
trust, 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000
and AQUILA MANAGEMENT CORPORATION (the "Manager"), a New York
corporation, 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
10017
W I T N E S S E T H:
WHEREAS, the Trust and the Manager wish to enter into an
Advisory and Administration Agreement referred to hereafter as
"this Agreement," with respect to the Trust);
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. In General
The Manager shall perform (at its own expense) the functions
set forth more fully herein for the Trust.
2. Duties and Obligations of the Manager
(a) Investment Advisory Services Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Trust, the Manager shall:
(i) supervise continuously the investment program of the
Trust and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold by
the Trust;
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Trust;
(iv) at its expense provide for pricing of the Trust's
portfolio daily using a pricing service or other source of
pricing information satisfactory to the Trust and, unless
otherwise directed by the Board of Trustees, provide for
pricing of the Trust's portfolio at least quarterly using
another such source satisfactory to the Trust; and
Subject to the provisions of Section 5 hereof, the Manager may at
its own expense delegate to a qualified organization ("Sub-
Adviser"), affiliated or not affiliated with the Manager, any or
all of the above duties. Any such delegation of the duties set
forth in (i), (ii) or (iii) above shall be by a written agreement
(the "Sub-Advisory Agreement") approved as provided in Section 15
of the Investment Company Act of 1940.
(b) Administration. Subject to the succeeding provisions of
this section and subject to the direction and control of the
Board of Trustees of the Trust, the Manager shall provide all
administrative services to the Trust other than those relating to
its investment portfolio delegated to a Sub-Adviser of the Trust
under a Sub-Advisory Agreement; as part of such administrative
duties, the Manager shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following functions and
for the maintenance of the headquarters of the Trust;
(ii) oversee all relationships between the Trust and any
sub-adviser, transfer agent, custodian, legal counsel,
auditors and principal underwriter, including the
negotiation of agreements in relation thereto, the
supervision and coordination of the performance of such
agreements, and the overseeing of all administrative matters
which are necessary or desirable for the effective operation
of the Trust and for the sale, servicing or redemption of
the Trust's shares;
(iii) either keep the accounting records of the Trust,
including the computation of net asset value per share and
the dividends (provided that if there is a Sub-Adviser,
daily pricing of the Trust's portfolio shall be the
responsibility of the Sub-Adviser under the Sub-Advisory
Agreement) or, at its expense and responsibility, delegate
such duties in whole or in part to a company satisfactory to
the Trust;
(iv) maintain the Trust's books and records, and prepare (or
assist counsel and auditors in the preparation of) all
required proxy statements, reports to the Trust's
shareholders and Trustees, reports to and other filings with
the Securities and Exchange Commission and any other
governmental agencies, and tax returns, and oversee the
insurance relationships of the Trust;
(v) prepare, on behalf of the Trust and at the Trust's
expense, such applications and reports as may be necessary
to register or maintain the registration of the Trust and/or
its shares under the securities or "Blue-Sky" laws of all
such jurisdictions as may be required from time to time;
(vi) respond to any inquiries or other communications of
shareholders of the Trust and broker-dealers, or if any such
inquiry or communication is more properly to be responded to
by the Trust's shareholder servicing and transfer agent or
distributor, oversee such shareholder servicing and transfer
agent's or distributor's response thereto.
(c) Compliance with Requirements. Any investment program
furnished, and any activities performed, by the Manager or by a
Sub-Adviser under this section shall at all times conform to, and
be in accordance with, any requirements imposed by: (1) the
Investment Company Act of 1940 (the "Act") and any rules or
regulations in force thereunder; (2) any other applicable laws,
rules and regulations; (3) the Declaration of Trust and By-Laws
of the Trust as amended from time to time; (4) any policies and
determinations of the Board of Trustees of the Trust; and (5) the
fundamental policies of the Trust, as reflected in its
registration statement under the Act or as amended by the
shareholders of the Trust.
(d) Best Efforts; Responsibility. The Manager shall give
the Trust the benefit of its best judgment and effort in
rendering services hereunder, but the Manager shall not be liable
for any loss sustained by reason of the adoption of any
investment policy or the purchase, sale or retention of any
security, whether or not such purchase, sale or retention shall
have been based upon (i) its own investigation and research or
(ii) investigation and research made by any other individual,
firm or corporation, if such purchase, sale or retention shall
have been made and such other individual, firm or corporation
shall have been selected in good faith by the Manager or a Sub-
Adviser.
(e) Other Customers. Nothing in this Agreement shall
prevent the Manager or any officer thereof from acting as
investment adviser, sub-adviser, administrator or manager for any
other person, firm, or corporation, and shall not in any way
limit or restrict the Manager or any of its officers,
stockholders or employees from buying, selling or trading any
securities for its own or their own accounts or for the accounts
of others for whom it or they may be acting, provided, however,
that the Manager expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.
(f) Order Allocation. In connection with any duties for
which it may become responsible to arrange for the purchase and
sale of the Trust's portfolio securities, the Manager shall
select, and shall cause any Sub-Adviser to select, such broker-
dealers ("dealers") as shall, in the Manager's judgment,
implement the policy of the Trust to achieve "best execution,"
i.e., prompt, efficient, and reliable execution of orders at the
most favorable net price. The Manager shall cause the Trust to
deal directly with the selling or purchasing principal or market
maker without incurring brokerage commissions unless the Manager
determines that better price or execution may be obtained by
paying such commissions; the Trust expects that most transactions
will be principal transactions at net prices and that the Trust
will incur little or no brokerage costs. The Trust understands
that purchases from underwriters include a commission or
concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread
between the bid and asked prices. In allocating transactions to
dealers, the Manager is authorized and shall authorize any Sub-
Adviser, to consider, in determining whether a particular dealer
will provide best execution, the dealer's reliability, integrity,
financial condition and risk in positioning the securities
involved, as well as the difficulty of the transaction in
question, and thus need not pay the lowest spread or commission
available if the Manager determines in good faith that the amount
of commission is reasonable in relation to the value of the
brokerage and research services provided by the dealer, viewed
either in terms of the particular transaction or the Manager's
overall responsibilities. If, on the foregoing basis, the
transaction in question could be allocated to two or more
dealers, the Manager is authorized, in making such allocation, to
consider (i) whether a dealer has provided research services, as
further discussed below; and (ii) whether a dealer has sold
shares of the Trust. Such research may be in written form or
through direct contact with individuals and may include
quotations on portfolio securities and information on particular
issuers and industries, as well as on market, economic, or
institutional activities. The Trust recognizes that no dollar
value can be placed on such research services or on execution
services and that such research services may or may not be useful
to the Trust and may be used for the benefit of the Manager or
its other clients. The Manager shall cause the foregoing
provisions, in substantially the same form, to be included in any
Sub-Advisory Agreement.
(g) Registration Statement; Information. It is agreed that
the Manager shall have no responsibility or liability for the
accuracy or completeness of the Trust's Registration Statement
under the Act and the Securities Act of 1933, except for
information supplied by the Manager for inclusion therein. The
Manager shall promptly inform the Trust as to any information
concerning the Manager appropriate for inclusion in such
Registration Statement, or as to any transaction or proposed
transaction which might result in an assignment of the Agreement.
(h) Liability for Error. The Manager shall not be liable
for any error in judgment or for any loss suffered by the Trust
or its security holders in connection with the matters to which
this Agreement relates, except a loss resulting from wilful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Nothing in this
Agreement shall, or shall be construed to, waive or limit any
rights which the Trust may have under federal and state
securities laws which may impose liability under certain
circumstances on persons who act in good faith.
(j) Indemnification. The Trust shall indemnify the Manager
to the full extent permitted by the Trust's Declaration of Trust.
3. Allocation of Expenses
The Manager shall, at its own expense, provide office space,
facilities, equipment, and personnel for the performance of its
functions hereunder and shall pay all compensation of Trustees,
officers, and employees of the Trust who are affiliated persons
of the Manager.
The Trust agrees to bear the costs of preparing and setting
in type its prospectuses, statements of additional information
and reports to its shareholders, and the costs of printing or
otherwise producing and distributing those copies of such
prospectuses, statements of additional information and reports as
are sent to its shareholders. All costs and expenses not
expressly assumed by the Manager under this sub-section or
otherwise by the Manager, administrator or principal underwriter
or by any Sub-Adviser shall be paid by the Trust, including, but
not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and
expenses of its Trustees other than those affiliated with the
Manager or such adviser, administrator or principal underwriter;
(v) legal and audit expenses; (vi) custodian and transfer agent,
or shareholder servicing agent, fees and expenses; (vii) expenses
incident to the issuance of its shares (including issuance on the
payment of, or reinvestment of, dividends); (viii) fees and
expenses incident to the registration under Federal or State
securities laws of the Trust or its shares; (ix) expenses of
preparing, printing and mailing reports and notices and proxy
material to shareholders of the Trust; (x) all other expenses
incidental to holding meetings of the Trust's shareholders; and
(xi) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations for
which the Trust may have to indemnify its officers and Trustees.
4. Compensation of the Manager The Trust agrees to pay the
Manager, and the Manager agrees to accept as full compensation
for all services rendered by the Manager as such, an annual fee
payable monthly and computed on the net asset value of the Trust
as of the close of business each business day at the annual rate
of 0.50 of 1% of such net asset value provided, however, that for
any day that the Trust pays or accrues a fee under the
Distribution Plan of the Trust based upon the assets of the
Trust, the annual fee shall be payable at the annual rate of 0.40
of 1% of such net asset value.
5. Termination of Sub-Advisory Agreement
The Sub-Advisory Agreement may provide for its termination
by the Manager upon reasonable notice, provided, however, that
the Manager agrees not to terminate the Sub-Advisory Agreement
except in accordance with such authorization and direction of the
Board of Trustees, if any, as may be in effect from time to time.
6. Duration and Termination of this Agreement
(a) Duration. This Agreement shall become effective on the
day it is approved by the shareholders of the Trust and shall,
unless terminated as hereinafter provided, continue in effect
until the April 30 next preceding the first anniversary of the
effective date of this Agreement, and from year to year
thereafter, but only so long as such continuance is specifically
approved at least annually (1) by a vote of the Trust's Board of
Trustees, including a vote of a majority of the Trustees who are
not parties to this Agreement or "interested persons" (as defined
in the Act) of any such party, with votes cast in person at a
meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Trust and by such a vote of
the Trustees.
(b) Termination. This Agreement may be terminated by the
Manager at any time without penalty upon giving the Trust sixty
days' written notice (which notice may be waived by the Trust)
and may be terminated by the Trust at any time without penalty
upon giving the Manager sixty days' written notice (which notice
may be waived by the Manager), provided that such termination by
the Trust shall be directed or approved by a vote of a majority
of its Trustees in office at the time or by a vote of the holders
of a majority (as defined in the Act) of the voting securities of
the Trust outstanding and entitled to vote. The portions of this
Agreement which relate to providing investment advisory services
(Sections 2(a), (c), (d) and (e)) shall automatically terminate
in the event of the assignment (as defined in the Act) of this
Agreement, but all other provisions relating to providing
services other than investment advisory services shall not
terminate, provided however, that upon such an assignment the
annual fee payable monthly and computed on the net asset value of
the Trust as of the close of business each business day shall be
reduced to the annual rate of 0.25 of 1% of such net asset value
and provided further, that for any day that the Trust pays or
accrues a fee under the Distribution Plan of the Trust based upon
the assets of the Trust, the annual fee shall be payable at the
annual rate of 0.20 of 1% of such asset value.
7. Disclaimer of Shareholder Liability
The Manager understands that the obligations of this
Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Trust's property; the Manager
represents that it has notice of the provisions of the Trust's
Declaration of Trust disclaiming shareholder liability for acts
or obligations of the Trust.
8. Notices of Meetings
The Trust agrees that notice of each meeting of the Board of
Trustees of the Trust will be sent to the Manager and that the
Trust will make appropriate arrangements for the attendance (as
persons present by invitation) of such person or persons as the
Manager may designate.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers and
their seals to be hereunto affixed, all as of the day and year
first above written.
ATTEST: TAX-FREE TRUST OF ARIZONA
________________________ By:___________________________________
ATTEST: AQUILA MANAGEMENT CORPORATION
_______________________ By:____________________________________
