INVESTMENT ADVISORY AGREEMENT between CONESTOGA FUNDS and CONESTOGA CAPITAL ADVISORS, LLC
between
and
CONESTOGA
CAPITAL ADVISORS, LLC
This
AGREEMENT (the “Agreement”) made this 2nd day of January 2008, by and between
Conestoga Funds, a Delaware business trust which may issue one or more series
of
shares of beneficial interest (the “Trust”), and Conestoga Capital Advisors,
LLC, a Delaware limited liability company (the “Adviser”).
WHEREAS,
the Trust is registered as an open-end, management investment company under
the
Investment Company Act of 1940, as amended (the “1940 Act”); and
WHEREAS,
the Trust desires to retain the Adviser to furnish investment advisory services
to the funds listed on Schedule A (each, a “Fund” and collectively, the
“Funds”), and the Adviser represents that it is willing and possesses legal
authority to so furnish such services;
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment.
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(a)
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General. The
Trust hereby appoints the Adviser to act as investment adviser to
the
Funds for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein
provided.
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(b)
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Employees
of Affiliates. The Adviser may, in its discretion, provide
such services through its own employees or the employees of one or
more
affiliated companies that are qualified to act as an investment adviser
to
the Trust under applicable laws; provided that (i) all persons,
when providing services hereunder, are functioning as part of an
organized
group of persons, and (ii) such organized group of persons is managed
at
all times by authorized officers of the
Adviser.
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(c)
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Sub-Advisers. It
is understood and agreed that the Adviser may from time to time employ
or
associate with such other entities or persons as the Adviser believes
appropriate to assist in the performance of this Agreement with respect
to
a particular Fund or Funds (each a “Sub-Adviser”), and that any such
Sub-Adviser shall have all of the rights and powers of the Adviser
set
forth in this Agreement; provided that a Fund shall not pay any
additional compensation for any Sub-Adviser and the Adviser shall
be as
fully responsible to the Trust for the acts and omissions of the
Sub-Adviser as it is for its own acts and omissions; and provided
further that the retention of any Sub-Adviser shall be approved in
advance by (i) the Board of Trustees of the Trust (the “Board”) and (ii)
the shareholders of the relevant Fund if required under any applicable
provisions of the 1940 Act or any exemptive relief granted
thereunder. The Adviser will review, monitor and report to the
Trust’s Board regarding the performance and investment procedures of any
Sub-Adviser. In the event that the services of any Sub-Adviser
are terminated, the Adviser may provide investment advisory services
pursuant to this Agreement to the Fund without a Sub-Adviser or employ
another Sub-Adviser without further shareholder approval, to the
extent
consistent with the 1940 Act or any exemptive relief granted
thereunder. A Sub-Adviser may be an affiliate of the
Adviser.
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2. Delivery
of Documents. The Trust has delivered to the Adviser copies of
each of the following documents, and will promptly deliver to it all future
amendments and supplements thereto, if any:
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(1)
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(a) the
Trust’s Trust Instrument;
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(2)
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(b) the
Bylaws of the Trust;
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(3)
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(c) resolutions
of the Board of the Trust authorizing the execution and delivery
of this
Agreement;
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(4)
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(d) the
Trust’s Registration Statement under the Securities Act of 1933, as
amended (the “1933 Act”), and the 1940 Act, on Form N-1A as filed with the
U.S. Securities and Exchange Commission (the
“Commission”);
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(5)
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(e) Notification
of Registration of the Trust under the 1940 Act on Form N-8A as filed
with
the Commission; and
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(6)
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(f) the
currently effective Prospectus and Statement of Additional Information
of
the Funds.
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3. Investment
Advisory and Other Services.
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(a)
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Management
of the Funds. The Adviser hereby undertakes to act as
investment adviser to the Funds. The Adviser shall regularly
provide investment advice to the Funds and continuously supervise
the
investment and reinvestment of cash, securities and other property
composing the assets of the Funds and, in furtherance thereof,
shall:
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(i)
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supervise
all aspects of the operations of the Trust and each
Fund;
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(ii)
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obtain
and evaluate pertinent economic, statistical and financial data,
as well
as other significant events and developments, which affect the economy
generally, the Funds’ investment programs, and the issuers of securities
included in the Funds’ portfolios and the industries in which they engage,
or which may relate to securities or other investments which the
Adviser
may deem desirable for inclusion in a Fund’s
portfolio;
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(iii)
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determine
which issuers and securities shall be included in the portfolio of
each
Fund;
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(iv)
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furnish
a continuous investment program for each
Fund;
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(v)
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in
its discretion and without prior consultation with the Trust, buy,
sell,
lend and otherwise trade any stocks, bonds and other securities and
investment instruments on behalf of each Fund;
and
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(vi)
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take,
on behalf of each Fund, all actions the Adviser may deem necessary
in
order to carry into effect such investment program and the Adviser’s
functions as provided above, including the making of appropriate
periodic
reports to the Trust’s Board of
Trustees.
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(b)
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Other
Services. The Adviser also hereby undertakes to provide,
or, upon receipt of written approval of the Trust, arrange for other
companies to provide, the following services to the Funds in the
manner
and to the extent that such services are reasonably necessary for
the
operation of the Funds:
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(i)
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accounting
services and functions, including costs and expenses of any independent
public accountants;
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(ii)
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non-litigation
related legal and compliance services, including the expenses of
maintaining registration and qualification of the Fund and the Portfolio
under federal, state and any other applicable laws and
regulations;
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(iii)
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dividend
disbursing agent, dividend reinvestment agent, transfer agent, and
registrar services and functions (including answering inquiries related
to
shareholder Fund accounts);
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(iv)
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custodian
and depository services and
functions;
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(v)
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distribution,
marketing, and/or underwriting
services;
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(vi)
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independent
pricing services;
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(vii)
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preparation
of reports describing the operations of the Funds, including the
costs of
providing such reports to broker-dealers, financial institutions
and other
organizations which render services and assistance in connection
with the
distribution of shares of the
Funds;
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(viii)
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sub-accounting
and recordkeeping services and functions, including maintenance of
shareholder records and shareholder information concerning the status
of
their Fund accounts by investment advisers, broker-dealers, financial
institutions, and other organizations on behalf of the
Adviser;
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(ix)
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shareholder
and Board of Trustee communication services, including the costs
of
preparing, printing and distributing notices of shareholders’ meetings,
proxy statements, prospectuses, statements of additional information,
Fund
reports, and other communications to the Fund’s shareholders, as well as
all expenses of shareholders’ and Board of Trustees’ meetings, including
the compensation and reimbursable expenses of the Trustees of the
Fund;
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(x)
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other
day-to-day administrative services, including the costs of designing,
printing, and issuing certificates representing shares of the Funds,
and
premiums for the fidelity bond maintained by the Funds pursuant to
Section
17(g) of the 1940 Act and rules promulgated thereunder (except for
such
premiums as may be allocated to third parties, as insureds
thereunder).
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(c)
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Covenants. The
Adviser shall carry out its investment advisory, other and supervisory
responsibilities in a manner consistent with the investment objectives,
policies, and restrictions provided in: (i) the Funds’ Prospectus and
Statement of Additional Information as revised and in effect from
time to
time; (ii) the Trust’s Trust Instrument, Bylaws or other governing
instruments, as amended from time to time; (iii) the 1940 Act; (iv)
other
applicable laws; and (v) such other investment policies, procedures
and/or
limitations as may be adopted by the Trust with respect to a Fund
and
provided to the Adviser in writing. The Adviser agrees to use
reasonable efforts to manage each Fund so that it will qualify, and
continue to qualify, as a regulated investment company under Subchapter
M
of the Internal Revenue Code of 1986, as amended, and regulations
issued
thereunder (the “Code”), except as may be authorized to the contrary by
the Trust’s Board. The management of the Funds by the Adviser
shall at all times be subject to the review of the Trust’s
Board.
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(d)
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Books
and Records. Pursuant to applicable law, the Adviser shall
keep each Fund’s books and records required to be maintained by, or on
behalf of, the Funds with respect to advisory services rendered
hereunder. The Adviser agrees that all records which it
maintains for a Fund are the property of the Fund and it will promptly
surrender any of such records to the Fund upon the Fund’s
request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any such records of the
Fund
required to be preserved by such
Rule.
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(e)
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Reports,
Evaluations and other Services. The Adviser shall furnish
reports, evaluations, information or analyses to the Trust with respect
to
the Funds and in connection with the Adviser’s services hereunder as the
Trust’s Board may request from time to time or as the Adviser may
otherwise deem to be desirable. The Adviser shall make
recommendations to the Trust’s Board with respect to Trust policies, and
shall carry out such policies as are adopted by the Board. The
Adviser shall, subject to review by the Board, furnish such other
services
as the Adviser shall from time to time determine to be necessary
or useful
to perform its obligations under this
Agreement.
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(f)
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Purchase
and Sale of Securities. The Adviser shall place all orders
for the purchase and sale of portfolio securities for each Fund with
brokers or dealers selected by the Adviser, which may include brokers
or
dealers affiliated with the Adviser to the extent permitted by the
1940
Act and the Trust’s policies and procedures applicable to the
Funds. The Adviser shall use its best efforts to seek to
execute portfolio transactions at prices which, under the circumstances,
result in total costs or proceeds being the most favorable to the
Funds. In assessing the best overall terms available for any
transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of
the
security, the financial condition and execution capability of the
broker
or dealer, research services provided to the Adviser, and the
reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In no event shall the
Adviser be under any duty to obtain the lowest commission or the
best net
price for any Fund on any particular transaction, nor shall the Adviser
be
under any duty to execute any order in a fashion either preferential
to
any Fund relative to other accounts managed by the Adviser or otherwise
materially adverse to such other
accounts.
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(g)
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Selection
of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers
may be
selected who also provide brokerage and research services (as those
terms
are defined in Section 28(e) of the Securities Exchange Act of 1934,
as
amended (the “1934 Act”)) to the Adviser and/or the other accounts over
which the Adviser exercises investment discretion. The Adviser
is authorized to pay a broker or dealer who provides such brokerage
and
research services a commission for executing a portfolio transaction
for
the Fund which is in excess of the amount of commission another broker
or
dealer would have charged for effecting that transaction if the Adviser
determines in good faith that the total commission is reasonable
in
relation to the value of the brokerage and research services provided
by
such broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser with respect
to
accounts over which it exercises investment discretion. The
Adviser shall report to the Board regarding overall commissions paid
by
the Fund and their reasonableness in relation to their benefits to
the
Fund. Any transactions for the Fund that are effected through
an affiliated broker-dealer on a national securities exchange of
which
such broker-dealer is a member will be effected in accordance with
Section
11(a) of the 1934 Act, and the regulations promulgated thereunder,
including Rule 11a2-2(T). The Fund hereby authorizes any such
broker or dealer to retain commissions for effecting such transactions
and
to pay out of such retained commissions any compensation due to others
in
connection with effectuating those
transactions.
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(h)
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Aggregation
of Securities Transactions. In executing
portfolio transactions for a Fund, the Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be sold or purchased with those of
other
Funds or its other clients if, in the Adviser’s reasonable judgment, such
aggregation (i) will result in an overall economic benefit to the
Fund,
taking into consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading requirements,
and
(ii) is not inconsistent with the policies set forth in the Trust’s
registration statement and the Fund’s Prospectus and Statement of
Additional Information. In such event, the Adviser will
allocate the securities so purchased or sold, and the expenses incurred
in
the transaction, in an equitable manner, consistent with its fiduciary
obligations to the Fund and such other
clients.
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4. Representations
and Warranties.
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(a)
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The
Adviser hereby represents and warrants to the Trust as
follows:
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(i)
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The
Adviser is a limited liability company duly organized and in good
standing
under the laws of the State of Delaware and is fully authorized to
enter
into this Agreement and carry out its duties and obligations
hereunder.
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(ii)
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The
Adviser is registered as an investment adviser with the Commission
under
the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and
is registered or licensed as an investment adviser under the laws
of all
applicable jurisdictions. The Adviser shall maintain such
registrations or licenses in effect at all times during the term
of this
Agreement.
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(iii)
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The
Adviser at all times shall provide its best judgment and effort to
the
Trust in carrying out the Adviser’s obligations
hereunder.
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(b)
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The
Trust hereby represents and warrants to the Adviser as
follows:
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(i)
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The
Trust has been duly organized as a business trust under the laws
of the
State of Delaware and is authorized to enter into this Agreement
and carry
out its terms.
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(ii)
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The
Trust is registered as an investment company with the Commission
under the
1940 Act and shares of each Fund are registered for offer and sale
to the
public under the 1933 Act and all applicable state securities laws
where
currently sold. Such registrations will be kept in effect
during the term of this Agreement.
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5. Compensation. As
compensation for the services which the Adviser is to provide or cause to be
provided pursuant to Paragraph 3, each Fund shall pay to the Adviser out of
Fund
assets an annual fee, computed and accrued daily and paid in arrears on the
first business day of every month, at the rate set forth opposite each Fund’s
name on Schedule A, which shall be a percentage of the average daily net assets
of the Fund (computed in the manner set forth in the Fund’s most recent
Prospectus and Statement of Additional Information) determined as of the close
of business on each business day throughout the month. At the request
of the Adviser, some or all of such fee shall be paid directly to a
Sub-Adviser. The fee for any partial month under this Agreement shall
be calculated on a proportionate basis.
In
the
event that the total expenses of a Fund exceed the limits on investment company
expenses imposed by any statute or any regulatory authority of any jurisdiction
in which shares of such Fund are qualified for offer and sale, the Adviser
will
bear the amount of such excess, except: (i) the Adviser shall not be
required to bear such excess to an extent greater than the compensation due
to
the Adviser for the period for which such expense limitation is required to
be
calculated unless such statute or regulatory authority shall so require, and
(ii) the Adviser shall not be required to bear the expenses of the Fund to
an extent which would result in the Fund’s or Trust’s inability to qualify as a
regulated investment company under the provisions of Subchapter M of the
Code.
The
Adviser shall have the right, but not the obligation, to voluntarily defer
any
portion of the advisory fee or absorb any portion of the expenses described
in
Section 7 below. To the extent that the Adviser defers advisory fees
or absorbs operating expenses, it may seek payment of such deferred fees or
reimbursement of such absorbed expenses within two (2) fiscal years after the
fiscal year in which fees were deferred or expenses were absorbed. A
Fund will make no such payment or reimbursement, however, if the Fund’s total
annual operating expenses exceed the expense limits disclosed in the Fund’s
Prospectus in effect at the time of the proposed payment or
reimbursement.
6. Interested
Persons. It is understood that, to the extent
consistent with applicable laws, the Trustees, officers and shareholders of
the
Trust are or may be or become interested in the Adviser as directors, officers
or otherwise and that directors, officers and shareholders of the Adviser are
or
may be or become similarly interested in the Trust.
7. Expenses. As
between the Adviser and the Funds, the Funds will pay for all their expenses
other than those expressly stated to be payable by the Adviser
hereunder.
8. Non-Exclusive
Services; Limitation of Adviser’s
Liability. The services of the Adviser to the Funds
are not to be deemed exclusive and the Adviser may render similar services
to
others and engage in other activities. The Adviser and its affiliates
may enter into other agreements with the Funds and the Trust for providing
additional services to the Funds and the Trust which are not covered by this
Agreement, and to receive additional compensation for such
services. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the
part
of the Adviser, or a breach of fiduciary duty with respect to receipt of
compensation, neither the Adviser nor any of its directors, officers,
shareholders, agents, or employees shall be liable or responsible to the Trust,
the Funds or to any shareholder of the Funds for any error of judgment or
mistake of law or for any act or omission in the course of, or connected with,
rendering services hereunder or for any loss suffered by the Trust, a Fund
or
any shareholder of a Fund in connection with the performance of this
Agreement.
9. Effective
Date; Modifications; Termination. This Agreement shall
become effective as of the date first written above, provided that it shall
have
been approved by a majority of the outstanding voting securities of each Fund,
in accordance with the requirements of the 1940 Act, or such later date as
may
be agreed by the parties following such shareholder approval.
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(a)
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This
Agreement shall continue in force for a period of two years from
the date
of this Agreement. Thereafter, this Agreement shall continue in
effect as to each Fund for successive annual periods, provided such
continuance is specifically approved at least annually (i) by a vote
of the majority of the Trustees of the Trust who are not parties
to this
Agreement or interested persons of any such party, cast in person
at a
meeting called for the purpose of voting on such approval and (ii)
by a
vote of the Board of the Trust or a majority of the outstanding voting
shares of the Fund.
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(b)
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The
modification of any of the non-material terms of this Agreement may
be
approved by a vote of a majority of those Trustees of the Trust who
are
not interested persons of any party to this Agreement, cast in person
at a
meeting called for the purpose of voting on such
approval.
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(c)
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Notwithstanding
the foregoing provisions of this Paragraph 9, either party hereto
may
terminate this Agreement at any time on sixty (60) days’ prior written
notice to the other, without payment of any penalty. Such a
termination by the Trust may be effected severally as to any particular
Fund, and shall be effected as to any Fund by vote of the Trust’s Board or
by vote of a majority of the outstanding voting securities of the
Fund. This Agreement shall terminate automatically in the event
of its assignment.
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10. Limitation
of Liability of Trustees and
Shareholders. The Adviser acknowledges the following
limitation of liability:
The
terms
“Conestoga Funds” and “Trustees” refer, respectively, to the trust created and
the Trustees, as trustees but not individually or personally, acting from time
to time under the Trust Instrument, to which reference is hereby made and a
copy
of which is on file at the office of the Secretary of State of the State of
Delaware, such reference being inclusive of any and all amendments thereto
so
filed or hereafter filed. The obligations of “Conestoga Funds”
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities
and
are not binding upon any of the Trustees, shareholders or representatives of
the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with the Trust or a Fund must look solely to the assets of the Trust or Fund
for
the enforcement of any claims against the Trust or Fund.
11. Service
Xxxx. The service xxxx of the Trust and the name
“Conestoga Funds” (and derivatives thereof) have been licensed to the Trust
by
the Adviser and their continued use is subject to the right of the Adviser
to
withdraw this permission in the event the Adviser is not the investment adviser
to the Trust.
12. Certain
Definitions. The terms “vote of a majority of the
outstanding voting securities,” “assignment,” “control,” and “interested
persons,” when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the
Advisers Act shall be construed as references to such laws as now in effect
or
as hereafter amended, and shall be understood as inclusive of any applicable
rules, interpretations and/or orders adopted or issued thereunder by the
Commission.
13. Independent
Contractor. The Adviser shall for all purposes herein be deemed
to be an independent contractor and shall, unless otherwise expressly provided
herein or authorized by the Board of the Trust from time to time, have no
authority to act for or represent a Fund in any way or otherwise be deemed
an
agent of a Fund.
14. Structure
of Agreement. The Trust is entering into this Agreement on behalf
of the Funds listed on Schedule A, severally and not jointly. The
responsibilities and benefits set forth in this Agreement shall refer to each
Fund severally and not jointly. No Fund shall have any responsibility
for any obligation of any other Fund arising out of this
Agreement. Without otherwise limiting the generality of the
foregoing:
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(a)
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any
breach of any term of this Agreement regarding the Trust with respect
to
any one Fund shall not create a right or obligation with respect
to any
other Fund;
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(b)
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under
no circumstances shall the Adviser have the right to set off claims
relating to a Fund by applying property of any other Fund;
and
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(c)
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the
business and contractual relationships created by this Agreement,
consideration for entering into this Agreement, and the consequences
of
such relationship and consideration relate solely to the Trust and
the
particular Fund to which such relationship and consideration
applies.
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This
Agreement is intended to govern only the relationships between the Adviser,
on
the one hand, and the Trust and the Funds, on the other hand, and (except as
specifically provided above in this Paragraph 14) is not intended to and shall
not govern (i) the relationship between the Trust and any Fund or (ii) the
relationships among the respective Funds.
15. Governing
Law. This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
16. Severability. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not
be affected thereby and, to this extent, the provisions of this Agreement shall
be deemed to be severable.
17. Notices. Notices
of any kind to be given to the Trust hereunder by the Adviser shall be in
writing and shall be duly given if mailed or delivered to:
000
X.
Xxxxxx-Xxxxxxx Xxxx
Xxxxxx
Xxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attention: Xxxxxxx
X. Xxxxxxxxxx, Xx.
President
with
a
copy to:
Xxxxxx
Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention: Xxxx
Xxxxxxxxxx, Esq.
or
at
such other address or to such individual as shall be so specified by the Trust
to the Adviser. Notices of any kind to be given to the Adviser
hereunder by the Trust shall be in writing and shall be duly given if mailed
or
delivered to the Adviser at:
Conestoga
Capital Advisors, LLC
000
X.
Xxxxxx-Xxxxxxx Xxxx
Xxxxxx
Xxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attention: Xxxxx
X. X’Xxxxxx
Managing
Partner
or
at
such other address or to such individual as shall be so specified by the Adviser
to the Trust. Notices shall be effective upon delivery.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed by their
respective officers thereunto duly authorized as of the date written
above.
CONESTOGA
FUNDS
CONESTOGA CAPITAL ADVISORS, LLC
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Name:
Mr. W.
Xxxxxxxxxxx Xxxxxxx
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Name: Xx.
Xxxxxxx X. Xxxxxxxxxx Xx.
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Title: Chairman,
CEO
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Title:
Managing Partner, Managing Member
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SCHEDULE
A
to
the
between
CONESTOGA
FUNDS and CONESTOGA CAPITAL ADVISORS, LLC
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Name
of Fund
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Fee
(as a percentage of average daily net assets)
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Conestoga
Small Cap Fund
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1.20% |
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Approved
by the Board of Trustees: September 20,
2007
