AGREEMENT
THIS AGREEMENT, made as of this 21st day of May, 2008, by and between Xxxxx
Capital Management, Inc. ("MCM"), an Oregon corporation, and Xxx Xxxxxx Funds
Inc. ("Xxx Xxxxxx"), a Delaware corporation.
WITNESSETH:
WHEREAS, Xxx Xxxxxx sponsors, underwrites and distributes a wide array of
unit investment trusts ("UITs");
WHEREAS, Xxx Xxxxxx desires to establish one or more UITs that will each
initially invest in securities selected in accordance with the process generally
described in Exhibit A attached hereto (the "Trusts");
WHEREAS, Xxx Xxxxxx further desires the analytical services of MCM with
respect to securities identified by Xxx Xxxxxx in accordance with the process
generally described in Exhibit A attached hereto;
WHEREAS, MCM is willing to provide the aforesaid analytical services to Xxx
Xxxxxx under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Identification of Securities.
(a) During the term of this Agreement, Xxx Xxxxxx shall provide MCM with
reasonable advance notice of the filing of each registration statement
pertaining to a Trust ("Registration Statement"). Following such notice, and in
accordance with the process and time frame described in attached Exhibit A, Xxx
Xxxxxx shall provide to MCM a list of all securities identified by Xxx Xxxxxx in
the manner described in Exhibit A in connection with each Trust. From such lists
of securities, MCM, utilizing its proprietary Technical Analysis Methodology
referred to in Exhibit A, will provide to Xxx Xxxxxx a list of recommended
securities (the "Identified Securities") for use solely in connection with the
selection of stocks for the Trusts. Xxx Xxxxxx will then choose from the
Identified Securities those securities to be deposited in the related Trust's
portfolio (the "Portfolio Securities") based upon all information available to
it, including, among other factors, market capitalization and liquidity
considerations.
(b) MCM will provide Xxx Xxxxxx with information reasonably requested by Xxx
Xxxxxx about the Portfolio Securities for use by Xxx Xxxxxx in preparing updated
prospectus disclosure and marketing materials for the Trusts. MCM shall have no
investment authority or discretion with respect to a Trust's Portfolio
Securities. MCM agrees to promptly review and comment upon disclosure in the
Registration Statement referred to in Section 12 hereof.
2. Xxx Xxxxxx acknowledges and agrees that it does not have any rights in or
to the use or output of the Technical Analysis Methodology other than Xxx
Xxxxxx'x ownership of the list of Identified Securities created by MCM. Unless
expressly permitted by MCM in writing, Xxx Xxxxxx may not use the Technical
Analysis Methodology for any purpose.
3. MCM's Services Unique. MCM and Xxx Xxxxxx agree that the services to be
performed by MCM as set forth herein are unique and may not be performed by
anyone other than MCM.
4. Fees. For the services to be performed hereunder, Xxx Xxxxxx, on behalf of
each Trust, agrees that each Trust shall pay MCM a fee equal to 12 basis points
(0.12%) of the "Net Asset Value" of such Trust as of the end of the initial
offering period of such Trust. Such fee shall be paid by the trustee of each
Trust to MCM within thirty (30) days following the end of the initial offering
period of such Trust. "Net Asset Value" as used in this Agreement shall mean
"current net asset value" as defined in Rule 2a-4 under the Investment Company
Act of 1940.
5. Term. Subject to Section 8, the term of this Agreement shall commence and
continue as described in this Section. The term of this Agreement shall commence
as of the date set forth above (the "Effective Date") and shall remain in full
force and effect until the fifth (5th) anniversary of the Effective Date, unless
this Agreement is terminated earlier as provided herein (such term being
referred to as the "Initial Term"). At the end of the Initial Term, this
Agreement shall automatically renew for successive one-year periods unless a
party terminates the Agreement by providing the other party a written notice to
that effect at least ninety (90) days prior to the end of the then-current term.
6. Exclusivity and Right of First Refusal.
(a) MCM covenants and agrees that during the term of this Agreement, neither
MCM, nor anyone acting on its behalf, shall be associated or involved with any
unit investment trust sponsor, distributor or seller in the creation, marketing
or sale of any unit investment trust based on the selection criteria set forth
in Exhibit A within the United States other than the Trusts. Nothing contained
herein shall limit the right of MCM to sponsor, create, market or promote any
investment company (as defined in Section 3(a)(1) of the Investment Company Act
of 1940, as amended, disregarding the provisions of Sections 3(b) and 3(c)
thereof), other than a unit investment trust.
(b) MCM covenants and agrees that, during the term of this Agreement, neither
MCM nor anyone acting on its behalf shall be associated or involved with anyone
in connection with the creation, administration, management, marketing or sale
of any unit investment trust within the United States unless MCM shall have
first promptly delivered a bona fide written offer to Xxx Xxxxxx to act as
sponsor, depositor, adviser, promoter, underwriter or distributor of such a unit
investment trust and Xxx Xxxxxx shall have failed to provide a written
acceptance of such offer to MCM within 30 days after receipt of such offer.
(c ) The exclusivity and right of first refusal provided above in Subsections
6(a) and (b) shall expire in the event that Xxx Xxxxxx fails to offer any Trust
within fifteen (15) months from the date of this Agreement or, thereafter, fails
to offer an additional Trust within any fifteen (15) month period from the
closing of the last Trust offering.
7. Assignment. Neither of the parties hereto may assign its respective rights
and obligations under this Agreement without the prior written consent of the
other.
8. Relationship of the Parties. The parties understand and agree that this
Agreement shall not be deemed to create any partnership or joint venture between
Xxx Xxxxxx and MCM, and that any services performed hereunder by MCM shall be as
an independent contractor and not as an employee or agent of Xxx Xxxxxx or any
Trust. MCM shall have no authority whatsoever to bind Xxx Xxxxxx or any Trust on
any agreement or obligation and MCM agrees that MCM shall not hold itself out as
an employee or agent of Xxx Xxxxxx or any Trust.
9. Termination.
(a) MCM may terminate this Agreement immediately upon a (i) material breach
of any representation, warranty or covenant of Xxx Xxxxxx that is not remedied
within ten (10) business days after written notice or (ii) Xxx Xxxxxx'x failure
to offer any Trust within fifteen (15) months from the date of this Agreement
or, fails to offer an additional Trust within any fifteen (15) month period from
the closing of the last Trust offering.
(b) Xxx Xxxxxx may terminate this Agreement immediately upon a material
breach of any representation, warranty or covenant of MCM that is not remedied
within ten (10) business days after written notice thereof.
(c) MCM and Xxx Xxxxxx may terminate this Agreement at any time upon the
execution by all parties of a written agreement to that effect.
(d) Any termination under Section 8(a) or (b) shall not limit any other
remedies for breach the non-breaching party may have at law or in equity.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not constitute termination of any Trust.
10. Confidentiality.
(a) The parties agree that certain material and information which has or may
come into the possession or knowledge of each in connection with this Agreement
or the performance hereof (e.g., proprietary business information (including,
without limitation, the names and addresses or other personal information of
customers, distributors, information providers and suppliers)), consists of
confidential and proprietary data or information whose disclosure to or use by
third parties would be damaging ("Confidential Information"). The parties may
reasonably designate, by notice in writing delivered to the other parties, other
information as being Confidential Information.
(b) All Confidential Information of a party (the "Disclosing Party") shall be
kept secret by the other party (the "Receiving Party") to the degree it keeps
secret its own confidential or proprietary information. Confidential Information
shall not be disclosed by the Receiving Party to its employees, officers,
agents, service providers or affiliates, except on a need-to-know basis and the
Receiving Party shall inform the recipients of their obligation to maintain the
information in confidence, but may be disclosed by the Receiving Party to State,
Federal, or other governmental agencies, authorities or courts as required by
law or regulation, or upon their order or request provided prompt notice of such
order or request is given to the Disclosing Party (if such notice is legally
permitted) and provided that the Receiving Party makes reasonable efforts to
protect the confidentiality of the Confidential Information at issue.
(c) The lists of Identified Securities and the Portfolio Securities are the
Confidential Information of Xxx Xxxxxx. The Technical Analysis Methodology is
the Confidential Information of MCM.
(d) No information that would otherwise be proprietary or confidential for
purposes of this Agreement pursuant to subsections (a), (b) or (c) above shall
be subject to the restrictions on disclosure imposed by this Section in the
event and to the extent that (i) such information is in, or becomes part of, the
public domain otherwise than through the fault of a party to which such
information does not belong, (ii) such information was known to such party prior
to the execution of this Agreement, or (iii) such information was revealed to
such party by a third person, and which the Receiving Party reasonably believes
has been obtained by such third person not in violation of any existing
confidentiality or non-disclosure agreement.
(e) Each party acknowledges and agrees that a breach of this Section 9 would
cause a permanent and irreparable damage for which money damages would be an
inadequate remedy. Therefore, each party shall be entitled to seek equitable
relief (including injunction and specific performance) in the event of any
breach of the provisions of this Section 9, in addition to all other remedies
available to such party at law or in equity.
(f) The covenants set forth in this Section 9 shall survive the termination
of this Agreement.
11. Covenants. During the period of this Agreement and for as long as any of
the Trusts remains outstanding, each of the parties agrees to:
(a) comply with all codes, regulations and laws applicable to the performance
of its obligations under this Agreement and obtain or have obtained all
necessary permits, licenses and other authorizations necessary for such
performance and maintain its business reputation and good standing;
(b) take such other actions as the other party hereto may reasonably request
to more effectively carry out its obligations under this Agreement; and
(c) do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, including, but not by way of limitation,
obtaining all consents, approvals, and authorizations, required of such party in
connection with the consummation of the transactions contemplated by this
Agreement. No party shall take any action that would be expected to result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect.
In addition, neither MCM nor Xxx Xxxxxx may refer to the other party or any
of the other party's affiliates, in any kind of communications, whether oral,
written or electronic, or otherwise, and whether in a piece published by MCM or
Xxx Xxxxxx or in response to questions of the media or others, without the other
party's prior consent, except that such consent shall not be required to the
extent that the content of a communication is substantially similar to
information included in (i) a communication to which the party has previously
given consent, (ii) any Registration Statement or (iii) other publicly available
materials produced by the party that is being referred to or described.
Notwithstanding anything to the contrary in this paragraph, a party may withdraw
consent upon reasonable written notice to the other party. Upon withdrawal of
consent, the notified party may continue to distribute any existing inventories
of previously consented-to printed materials,
12. Indemnification.
(a) By Xxx Xxxxxx. In the event any claim is brought by any third party
against MCM or any of its affiliates that relates to, arises out of or is based
upon the performance by Xxx Xxxxxx of its obligations hereunder, or the failure
of Xxx Xxxxxx, or any of Xxx Xxxxxx'x affiliates, as the case may be, to comply
with any law, rule or regulation relating to the Trusts, Xxx Xxxxxx, or any of
Xxx Xxxxxx'x affiliates, including without limitation, any claims relating to
any actual or alleged material misstatement or omission in the Trust's
Registration Statement, proxy statement, or any communication to current or
prospective investors in the Trust, MCM or any of its affiliates shall promptly
notify Xxx Xxxxxx and Xxx Xxxxxx shall defend such claim at Xxx Xxxxxx'x expense
and under Xxx Xxxxxx'x control. Xxx Xxxxxx shall indemnify and hold harmless MCM
or any of its affiliates against any judgment, liability, loss, cost or damage
(including litigation costs and reasonable attorneys' fees) arising from or
related to such claim whether or not such claim is successful. MCM or any of its
affiliates shall have the right, at their expense, to participate in the defense
of such claim through counsel of their own choosing; provided, however, that Xxx
Xxxxxx shall not be required to pay any settlement amount that it has not
approved in advance. Notwithstanding the above, Neither MCM nor any of its
affiliates shall be entitled to indemnification hereunder to the extent that the
judgment, liability, loss, cost or damage arising from a claim for which
indemnification is sought hereunder results directly or indirectly from the
gross negligence or willful misconduct of MCM or any of its affiliates. For the
avoidance of doubt, neither Xxx Xxxxxx nor any of its affiliates shall be liable
to MCM for any error in judgment, mistake of law, or loss arising out of any
investments held by the Trust, or for any other act or omission in the
performance by Xxx Xxxxxx and its affiliates of their obligations hereunder,
except for liability resulting from the gross negligence or willful misconduct
of Xxx Xxxxxx or any of its affiliates.
(b) By MCM. In the event any claim is brought by any third party against Xxx
Xxxxxx, any of the Trusts, or any of Xxx Xxxxxx'x affiliates that relates to,
arises out of or is based upon the performance by MCM of its obligations
hereunder, or the failure of MCM to comply with any law, rule or regulation, Xxx
Xxxxxx, the Trusts, or Xxx Xxxxxx'x affiliates, as the case may be, shall
promptly notify MCM and MCM shall defend such claim at its expense and under its
control. MCM shall indemnify and hold harmless Xxx Xxxxxx, the Trusts, and Xxx
Xxxxxx'x affiliates against any judgment, liability, loss, cost or damage
(including litigation costs and reasonable attorneys' fees) arising from or
related to such claim, whether or not such claim is successful. Xxx Xxxxxx, the
Trusts, or Xxx Xxxxxx'x affiliates, as the case may be, shall have the right, at
their expense, to participate in the defense of such claim through counsel of
their own choosing; provided, however, MCM shall not be required to pay any
settlement amount that it has not approved in advance. Notwithstanding the
above, neither Xxx Xxxxxx, the Trusts, nor any of Xxx Xxxxxx'x affiliates shall
be entitled to indemnification hereunder to the extent that the judgment,
liability, loss, cost or damage arising from a claim for which indemnification
is sought hereunder results directly or indirectly from the gross negligence or
willful misconduct of Xxx Xxxxxx, the Trusts, or Xxx Xxxxxx'x affiliates. For
the avoidance of doubt, neither MCM nor any of its affiliates shall be liable to
Xxx Xxxxxx for any error in judgment, mistake of law, or loss arising out of any
investments held by the Trust, or for any other act or omission in the
performance by MCM and its affiliates of their obligations hereunder, except for
liability resulting from the gross negligence or willful misconduct of MCM or
any of its affiliates. In addition, neither MCM nor any of its affiliates shall
have responsibility whatsoever for the management of the Trust or any other
assets of Xxx Xxxxxx pursuant to this Agreement, and shall incur no liability
for any loss or expense pursuant to this Agreement that may result from Xxx
Xxxxxx'x management of such assets.
(c) The indemnifications set forth in this Section 11 shall survive the
termination of this Agreement for any cause whatsoever.
13. Review of Registration Statement and other materials. MCM hereby
acknowledges that it has reviewed and had an opportunity to comment upon those
provisions of the Registration Statement, as amended, specifically referring to
or describing MCM and the securities selection process, and represents that the
statements and other information provided to Xxx Xxxxxx by MCM are accurate in
all material respects. However, MCM makes no representation or warranties with
respect to the sufficiency of any such disclosures in the Registration Statement
under federal or state securities laws.
14. Expenses. During the term of this Agreement, MCM will provide the office
space, furnishings, equipment and personnel required to perform its duties under
this Agreement. In the event that MCM participates in presentations or marketing
events at Xxx Xxxxxx'x reasonable request, Xxx Xxxxxx will pay, or reimburse
MCM, for airfare, accommodations, and related expenses reasonably incurred by
MCM in connection with any such presentation or marketing event.
15. Governing Law. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of New York without reference
to or inclusion of the principles of choice of law or conflicts of law of that
jurisdiction. It is the intent of the parties that the substantive law of the
State of New York governs this Agreement and not the law of any other
jurisdiction incorporated through choice of law or conflicts of law principles.
Any dispute between the parties arising under or in any way related to this
Agreement will be fully and finally resolved in arbitration under the commercial
rules of the American Arbitration Association.
16. Waiver of Breach. The failure of a party to require the performance of
any term of this Agreement or the waiver of a party of any breach hereunder
shall not prevent a subsequent enforcement of such term nor be deemed a waiver
of any subsequent breach.
17. Scope of Agreement. This document constitutes the entire Agreement of the
parties with respect to the subject matter hereof, supersedes all prior oral or
written agreements with respect to the subject matter hereof, and can be amended
only by a writing executed by all of the parties.
18. Notices. All notices from any party to the other pursuant to this
Agreement shall be in writing or by facsimile transmission and shall be sent to
the following addresses, or to such addresses as the parties hereto may be
notified in writing from time to time:
If to MCM:
Xxxxx Xxxxx
President, Xxxxx Capital Management, Inc.
0000 XX Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
If to Xxx Xxxxxx:
0 Xxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxx Xxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxx
With copy to:
Xxx Xxxxxx Funds Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Office of the General Counsel
Notices shall be deemed given upon receipt via certified mail, overnight
courier, or hand delivery.
19. Severability. In the event that any provision of this Agreement or
application hereof to any person or in any circumstances shall be determined to
be invalid, unlawful, or unenforceable to any extent, the remainder of this
Agreement, and the application of any provision to persons or circumstances
other than those as to which it is determined to be unlawful, invalid or
enforceable, shall not be affected thereby, and each remaining provision of this
Agreement shall continue to be valid and may be enforced to the fullest extent
permitted by law.
20. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by a duly authorized representative thereof as of the date first
above written.
XXX XXXXXX FUNDS INC.
By:________________________________
Name: _____________________________
Title: ______________________________
XXXXX CAPITAL MANAGEMENT, INC.
By:_______________________________
Name: ____________________________
Title:______________________________
EXHIBIT A
The portfolio of each Trust will consist of stocks selected in the following
manner:
1. Xxx Xxxxxx will identify an initial list of stocks as having experienced
certain types of insider buying activity. That initial list will be provided to
MCM.
2. Following receipt of the initial list of stocks, MCM will identify those
stocks that MCM recommends be excluded from further consideration.
3. After excluding some or all of the stocks identified by MCM for exclusion,
Xxx Xxxxxx will further refine the list of stocks. Thereafter, a refined list of
stocks will be provided to MCM for application by MCM of MCM's proprietary
"Technical Analysis Methodology" to create a list of Identified Stocks for Xxx
Xxxxxx. In connection with MCM's creation of a list of Identified Stocks, Xxx
Xxxxxx may request that MCM include or apply reasonable supplemental selection
parameters or objectives.
4. Upon receipt of the list of Identified Stocks, Xxx Xxxxxx will then choose
from the Identified Securities those securities to be deposited in the related
Trust's portfolio (the "Portfolio Securities") based upon all information
available to it, including, among other factors, market capitalization and
liquidity considerations.
