ADMINISTRATIVE SERVICE AGREEMENT
between
AVALON CAPITAL, INC.
and
AMERICAN DATA SERVICES, INC.
668852.1
INDEX
1. DUTIES OF THE ADMINISTRATOR.
2. COMPENSATION OF THE ADMINISTRATOR.
3. RESPONSIBILITY AND INDEMNIFICATION.
4. REPORTS.
5. ACTIVITIES OF THE ADMINISTRATOR.
6. RECORDS.
7. CONFIDENTIALITY.
8. DURATION AND TERMINATION OF THE AGREEMENT.
9. ASSIGNMENT.
10. NEW YORK LAWS TO APPLY
11. AMENDMENTS TO THIS AGREEMENT.
12. MERGER OF AGREEMENT
13. NOTICES.
SCHEDULE A
(A) ADMINISTRATIVE SERVICE FEE.
(B) EXPENSES.
(C) STATE REGISTRATION (BLUE SKY) SURCHARGE:
(D) SPECIAL REPORTS.
(E) SERVICE DEPOSIT.
SCHEDULE B
668852.1
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the 1ST day of January, 1997, by and between Avalon Capital,
Inc., a Maryland Corporation, having its principal office and place of business
at 00 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 (the "Fund"), and American
Data Services, Inc., a New York corporation having its principal office and
place of business at 00 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxx 00000 (the
"Administrator").
BACKGROUND
WHEREAS, the Fund is a non-diversified closed-end management investment
company registered with the United States Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator is a corporation experienced in providing
administrative services to closed-end investment companies and possesses
facilities sufficient to provide such services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance
and facilities of the Administrator and to have the Administrator perform for
the Fund certain services appropriate to the operations of the Fund and the
Administrator is willing to furnish such services in accordance with the terms
hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and the Administrator hereby agree to the
following:
1. DUTIES OF THE ADMINISTRATOR.
The Administrator will provide the Fund with the necessary office
space, communication facilities and personnel to perform the following services
for the Fund:
(a) Monitor all regulatory (1940 Act IRS and state) and prospectus
restrictions for compliance;
(b) Prepare and coordinate the preparation and printing of semi-annual
and annual financial statements, other communication to shareholders, notices of
shareholder meetings, proxy statements and proxy card;
(c) Prepare selected management reports for performance and compliance
analyses as agreed upon by the Fund and Administrator from time to time;
(d) Prepare selected financial data required for directors' meetings as
agreed upon by the Fund and the Administrator from time to time and coordinate
directors meeting agendas with outside legal counsel to the Fund;
(e) Determine income and capital gains available for distribution and
calculate distributions required to meet regulatory, income, and excise tax
requirements, to be reviewed by the Fund's independent public accountants;
(f) Prepare the Fund's federal, state, and local tax returns to be
reviewed by the Fund's independent public accountants;
(g) Prepare and maintain the Fund's operating expense budget to
determine proper expense accruals to be charged to the Fund in order to
calculate it's daily net asset value including calculation of contractual or
other expense limitations, expense waivers, and all Fund disbursements;
668852.1
(h) 1940 ACT filings -
In conjunction with the Fund's outside legal counsel the
Administrator will:
* Prepare the Fund's Form N-SAR reports;
* Update all financial sections of the Fund's Prospectus and Statement
of Additional Information and coordinate their completion;
* Update all financial sections of the Fund's proxy statement and
coordinate its completion;
* Prepare an annual update to Fund's 24f-2 filing (if applicable);
* Prepare annual repurchase offer and periodic subscription offers for
shareholders.
(i) Monitor services provided by the Fund's custodian bank as well as
any other service providers to the Fund;
(j) Provide appropriate financial schedules (as requested by the Fund's
independent public accountants or SEC examiners), coordinate the Fund's annual
or SEC audit, and provide office facilities as may be required;
(k) Attend management and board of directors meetings as requested;
(l) The preparation and filing (filing fee to be paid by the Fund) of
applications and reports as necessary to register or maintain the Funds
registration under the securities or "Blue Sky" laws of the various states
selected by the Fund or its Distributor.
(m) Fund Accounting Services to be provided:
1) Obtain daily securities quotations for all securities in the Fund's
portfolio from independent pricing services and determination of unrealized
appreciation/depreciation of portfolio securities.
2) Timely calculate and transmit to NASDAQ the Fund's weekly net asset value
and communicate such value to the Fund and its transfer agent;
3) Maintain and keep current all books and records of the Fund as required by
Rule 31a-1 under the 1940 Act, as such rule or any successor rule may be amended
from time to time ("Rule 31a-1"), that are applicable to the fulfillment of the
Administrator's duties hereunder, as well as any other documents necessary or
advisable for compliance with applicable regulations as may be mutually agreed
to between the Fund and the Administrator. Without limiting the generality of
the foregoing, the Administrator will prepare and maintain the following records
upon receipt of information in proper form from the Fund or its authorized
agents:
* Cash receipts journal
* Cash disbursements journal
* Dividend record
* Purchase and sales - portfolio securities journals
* Subscription and redemption journals
* Security ledgers
* Broker ledger
* General ledger
* Daily expense accruals
* Daily income accruals
* Securities and monies borrowed or loaned and collateral therefore
* Foreign currency journals
* Trial balances
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4) Provide the Fund and its investment adviser with daily portfolio valuation,
net asset value calculation and other standard operational reports as requested
from time to time.
5) Provide facilities to accommodate annual audit and any audits or
examinations conducted by the Securities and Exchange Commission or any other
governmental or quasi-governmental entities with jurisdiction.
6) Verify and reconcile with Fund's custodian bank all daily trade activity.
The Administrator shall, for all purposes herein, be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. COMPENSATION OF THE ADMINISTRATOR.
In consideration of the services to be performed by the Administrator
as set forth herein for each portfolio listed in Schedule B, the Administrator
shall be entitled to receive compensation and reimbursement for all reasonable
out-of-pocket expenses. The Fund agrees to pay the Administrator the fees and
reimbursement of out-of-pocket expenses as set forth in the fee schedule
attached hereto as Schedule A, which may be amended from time to time by mutual
agreement of the parties hereto.
3. RESPONSIBILITY AND INDEMNIFICATION.
(a) The Administrator shall be held to the exercise of reasonable care
in carrying out the provisions of the Agreement, but shall be without liability
to the Fund for any action taken or omitted by it in good faith without
negligence, bad faith, willful misconduct or reckless disregard of its duties
hereunder. It shall be entitled to rely upon and may act upon the accounting
records and reports generated by the Fund, advice of the Fund, or of counsel for
the Fund and upon statements of the Fund's independent accountants, and shall be
without liability for any action reasonably taken or omitted pursuant to such
records and reports or advice, provided that such action is not, to the
knowledge of the Administrator, in violation of applicable federal or state laws
or regulations, and provided further that such action is taken without
negligence, bad faith, willful misconduct or reckless disregard of its duties.
(b) The Administrator shall not be liable to the Fund for any error of
judgment or mistake of law or for any loss arising out of any act or omission by
the Administrator in the performance of its duties hereunder except as
hereinafter set forth. Nothing herein contained shall be construed to protect
the Administrator against any liability to the Fund or its security holders to
which the Administrator shall otherwise be subject by reason of willful
misfeasance, bad faith, negligence in the performance of its duties on behalf of
the Fund, reckless disregard of the Administrator's obligations and duties under
this Agreement or the willful violation of any applicable law.
(c) Except as may otherwise be provided by applicable law, neither the
Administrator nor its stockholders, officers, directors, employees or agents
shall be subject to, and the Fund shall indemnify and hold such persons harmless
from and against, any liability for and any damages, reasonable expenses
(including attorney's fees) or losses incurred by reason of the inaccuracy of
information furnished to the Administrator by the Fund or its authorized agents
or in connection with any error in judgment or mistake of law or any act or
omission in the course of, connected with or arising out of any services to be
rendered hereunder, except by reason of willful misfeasance, bad faith or
negligence in the performance of its duties, by reason of reckless disregard of
the Administrator's obligations and duties under this Agreement or the willful
violation of any applicable law.
4. REPORTS.
(a) The Fund shall provide to the Administrator on a quarterly basis a
report of a duly authorized officer of the Fund representing that all
information furnished to the Administrator during the preceding quarter was
true, complete and correct to the best of its knowledge. The Administrator shall
not be responsible for the accuracy of
668852.1
any information furnished to it by the Fund, and the Fund shall hold the
Administrator harmless in regard to any liability incurred by reason of the
inaccuracy of such information.
(b) The Administrator shall provide to the Board of Directors of the
Fund, on a quarterly basis, a report, in such a form as the Administrator and
the Fund shall from time to time agree, representing that, to its knowledge, the
Fund was in compliance with all requirements of applicable federal and state
law, including without limitation, the rules and regulations of the Securities
and Exchange Commission and the Internal Revenue Service, or specifying any
instances in which the Fund was not so in compliance. Whenever, in the course of
performing its duties under this Agreement, the Administrator determines, on the
basis of information supplied to the Administrator by the Fund, that a violation
of applicable law has occurred, or that, to its knowledge, a possible violation
of applicable law may have occurred or, with the passage of time, could occur,
the Administrator shall promptly notify the Fund and its counsel of such
violation.
5. ACTIVITIES OF THE ADMINISTRATOR.
The Administrator shall be free to render similar services to others so
long as its services hereinunder are not impaired thereby.
6. RECORDS.
The accounts and records maintained by the Administrator shall be the property
of the Fund, and shall be surrendered to the Fund promptly upon request by the
Fund in the form in which such accounts and records have been maintained or
preserved. The Administrator agrees to maintain a back-up set of accounts and
records of the Fund (which back-up set shall be updated on at least a weekly
basis) at a location other than that where the original accounts and records are
stored. The Administrator shall assist the Fund's independent auditors, or, upon
approval of the Fund, any regulatory body, in any requested review of the Fund's
accounts and records. The Administrator shall preserve the accounts and records
in its possession (at the expense of the Fund) as they are required to be
maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY.
The Administrator agrees that it will, on behalf of itself and its
officers and employees, treat all transactions contemplated by this Agreement,
and all other information germane thereto, as confidential and such information
shall not be disclosed to any person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THE AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (3) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, upon sixty
(60) days prior written notice.
Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, the Administrator reserves the right to charge for any
other reasonable expenses associated with such termination.
9. ASSIGNMENT.
This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the prior written consent
of the Administrator, or by the Administrator without the prior written consent
of the Fund.
10. NEW YORK LAWS TO APPLY
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
668852.1
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
12. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
13. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when delivered in person or by certified
mail, return receipt requested, and shall be given to the following addresses
(or such other addresses as to which notice is given):
To the Fund: To the Administrator:
Xxxxxx X. Xxxxxx Xxxxxxx Xxxxx
President President
Avalon Capital, Inc. American Data Services, Inc.
00 Xxxxxxxx Xxxxxx 00 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxxxxxxxx, Xxx Xxxx 00000
With a copy to:
Xxxxxx X. Xxxxxx, Esq.
Battle Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AVALON CAPITAL, INC. AMERICAN DATA SERVICES, INC.
.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxx Xxxxx
Xxxxxx X. Xxxxxx, President Xxxxxxx Xxxxx, President
668852.1
SCHEDULE A
(a) ADMINISTRATIVE SERVICE FEE:
For the services rendered by the Administrator in its capacity
as administrator, as specified in Paragraph 1. DUTIES OF THE
ADMINISTRATOR, the Fund shall pay the Administrator within ten (10)
days after receipt of an invoice from the Administrator at the
beginning of each month, a fee equal to the greater of:
NOTE: The following fees are per portfolio serviced.
MINIMUM FEE:
CALCULATED FEE WILL BE BASED UPON PRIOR MONTH AVERAGE NET ASSETS:
(No prorating partial months)
Each Portfolio
Under $11 million....................... $3,100
From $11 million to $20 million......... 3,700
From $20 million on..................... 4,400
OR,
NET ASSET CHARGE:
* 1/12th of 0.010% (10 basis points) of first $100 million of average
net assets of portfolio for month, plus; * 1/12th of 0.075% (7.5 basis
points) of next $100 million of average net assets of portfolio for
month, plus; * 1/12th of 0.050% (5 basis points) of average net assets
of portfolio for month in excess of $200 million.
(b) EXPENSES.
The Fund shall reimburse the Administrator for any direct
out-of-pocket expenses, exclusive of salaries, advanced by the
Administrator in connection with but not limited to the printing or
filing of documents for the Fund, travel, telephone, quotation
services, facsimile transmissions, stationery and supplies, record
storage, postage, telex, and courier charges, incurred in connection
with the performance of its duties hereunder. the Administrator shall
provide the Fund with a monthly invoice of such expenses and the Fund
shall reimburse the Administrator within fifteen (15) days after
receipt thereof.
(c) STATE REGISTRATION (BLUE SKY) SURCHARGE:
The fees enumerated in paragraph (a) above include the initial
state registration, renewal and maintenance of registrations (as
detailed in Paragraph 1(l) DUTIES OF THE ADMINISTRATOR) for three
states. Each additional state registration requested will be subject to
the following fees:
668852.1
Initial registration.................... $295.00
From $11 million to $20 million......... $150.00
From $20 million on..................... $ 25.00
(d) SPECIAL REPORTS.
All reports and /or analyses requested by the Fund, its
auditors, legal counsel, portfolio manager, or any regulatory agency
having jurisdiction over the Fund, that are not in the normal course of
fund administrative activities as specified in Section 1 of this
Agreement shall be subject to an additional charge, agreed upon in
advance, based upon the following rates:
Labor:
Senior staff - $150.00/hr. Junior staff - $ 75.00/hr.
Computer time - $45.00/hr.
(e) SERVICE DEPOSIT.
The Fund will remit to the Administrator upon execution of this Agreement a
security deposit equal to one (1) month's minimum fee under this Agreement,
computed in accordance with the number of portfolios listed in Schedule B of
this Agreement. The Fund will have the option to have the security deposit
applied to the last month's service fee, or applied to any new contract between
the Fund and the Administrator.
668852.1
SCHEDULE B
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
AVALON CAPITAL, INC.
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668852.1
