MANAGEMENT AGREEMENT
TO: Sparrow Capital Management Incorporated
000 Xxxxx Xxxxxxx Xxx., Xxxxx 000 Xxxxx
Xx. Xxxxx, XX 00000
Dear Sirs:
Sparrow Funds (the "Trust") herewith confirms our agreement with you.
The Trust has been organized to engage in the business of an investment
company. The Trust currently offers one series of shares to investors, Sparrow
Growth Fund (the "Fund").
You have been selected to act as the sole investment adviser of the Fund
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 effective upon the date of the execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment advice as you in
your discretion deem advisable and will furnish a continuous investment program
for the Fund consistent with the Fund's investment objectives and policies. You
will determine the securities to be purchased for the Fund, the portfolio
securities to be held or sold by the Fund and the portion of the Fund's assets
to be held uninvested, subject always to the Fund's 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. 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 Fund.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay all operating expenses of the Fund, including the compensation
and expenses of any employees of the Fund and of any other persons rendering any
services to the Fund; clerical and shareholder service staff salaries; office
space and other office expenses; fees and expenses incurred by the Fund in
connection with membership in investment company organizations; legal, auditing
and accounting expenses; expenses of registering shares under federal and state
securities laws, excluding expenses incurred by the Fund in connection with the
organization and initial registration of shares of the Fund; insurance expenses;
fees and expenses of the custodian, transfer agent, dividend disbursing agent,
shareholder service agent, plan agent, administrator, accounting and pricing
services agent and underwriter of the Fund; expenses, including clerical
expenses, of issue, sale, redemption or repurchase of shares of the Fund; 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 Fund's current and prospective 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; advertising, promotion and other expenses incurred directly or
indirectly in connection with the sale or distribution of the Fund's shares
(including expenses incurred pursuant to the Fund's Rule 12b-1 Distribution
Plan); and all other operating expenses not specifically assumed by the Fund.
The Fund will pay all brokerage fees and commissions, taxes, interest, fees
and expenses of the non-interested person trustees and such extraordinary or
non-recurring expenses as may arise, and litigation to which the Fund may be a
party and indemnification of the Trust's trustees and officers with respect
thereto. You may obtain reimbursement from the Fund, at such time or times as
you may determine in your sole discretion, for any of the expenses advanced by
you, which the Fund is obligated to pay, and such reimbursement shall not be
considered to be part of your compensation pursuant to this Agreement.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments to be made as provided
in this Agreement, as of the last business day of each month, the Fund will pay
you a fee at the annual rate of 2.50% of the average value of its daily net
assets.
The average value of the daily net assets of the Fund 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 the Fund is suspended for any particular
business day, then for the purposes of this paragraph, the value of the net
assets of the Fund 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 Fund's net assets may lawfully be determined, on that day. If the
determination of the net asset value of the Fund 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 Fund as last
determined (whether during or prior to such month).
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio securities for the
account of the Fund, it is understood that you will arrange for the placing of
all orders for the purchase and sale of portfolio securities for the 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 Fund 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 Fund 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 Fund 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 Fund and to accounts over which you exercise investment
discretion. The Fund and you understand and acknowledge that, although the
information may be useful to the Fund and you, it is not possible to place a
dollar value on such information. The Board shall periodically review the
commissions paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits to
the Fund.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best qualitative execution as
described above, you may give consideration to sales of shares of the Fund as a
factor in the selection of brokers and dealers to execute Fund portfolio
transactions.
Subject to the provisions of the Investment Company Act of 1940, as
amended, and other applicable law, you, any of your affiliates or any affiliates
of your affiliates may retain compensation in connection with effecting the
Fund's portfolio transactions, including transactions effected through others.
If any occasion should arise in which you give any advice to clients of yours
concerning the shares of the Fund, you will act solely as investment counsel for
such client and not in any way on behalf of the Fund. Your services to the Fund
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 may rely on information reasonably believed by you to be accurate and
reliable. Except as may otherwise be required by the Investment Company Act of
1940 or the rules thereunder, neither you nor your shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under, or
payments made pursuant to, this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of your duties
under this Agreement, or by reason of reckless disregard by any of such persons
of your obligations and duties under this Agreement.
Any person, even though also a director, officer, employee, shareholder or
agent of you, who may be or become an officer, director, trustee, employee or
agent of the Trust, shall be deemed, when rendering services to the Trust or
acting on any business of the Trust (other than services or business in
connection with your duties hereunder), to be rendering such services to or
acting solely for the Trust and not as a director, officer, employee,
shareholder or agent of you, or one under your control or direction, even though
paid by you.
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall take effect on the date of its execution, and shall
remain in force for a period of two (2) years from the date of its execution,
and from year to year thereafter, 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 the Fund, 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 the Trust, by a vote cast in person at a meeting called for the purpose of
voting such approval.
If the shareholders of the Fund fail to approve the Agreement in the manner
set forth above, upon request of the Board, you will continue to serve or act in
such capacity for the Fund 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 Fund to you
for your services to and payments on behalf of the Fund 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 with
respect to the Fund, 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 Fund,
or by you. This Agreement shall automatically terminate in the event of its
assignment.
7. USE OF NAME
The Trust and you acknowledge that all rights to the name "Sparrow" belong
to you, and that the Trust is being granted a limited license to use such words
in its Fund name or in any class name. In the event you cease to be the adviser
to the Fund, the Trust's right to the use of the name "Sparrow" shall
automatically cease on the ninetieth day following the termination of this
Agreement. The right to the name may also be withdrawn by you during the term of
this Agreement upon ninety (90) days' written notice by you to the Trust.
Nothing contained herein shall impair or diminish in any respect, your right to
use the name "Sparrow" 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 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, and (if required under
interpretations of the Act by the Securities and Exchange Commission) by vote of
the holders of a majority of the outstanding voting securities of the series to
which the amendment relates.
9. LIMITATION OF LIABILITY TO TRUST PROPERTY
The term "Sparrow Funds" 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 the
Declaration of Trust of the Trust. The execution and delivery of this Agreement
have been authorized by the trustees and shareholders of the Trust and signed by
officers of the Trust, acting as such, and neither such authorization by such
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. A copy of the Agreement and
Declaration of Trust of the Trust is on file with the Secretary of the State of
Ohio.
10. SEVERABILITY
In the event any provision of this Agreement is determined to be void or
unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
11. QUESTIONS OF INTERPRETATION
(a) This Agreement shall be governed by the laws of the State of
Ohio.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a
term or provision of the Investment Company Act of 1940, as
amended (the "Act") shall be resolved by reference to such term
or provision of the Act and to interpretation thereof, if any, by
the United States courts or in the absence of any controlling
decision of any such court, by the Securities and Exchange
Commission or its staff. In addition, where the effect of a
requirement of the Act, reflected in any provision of this
Agreement is revised by rule, regulation, order or interpretation
of the Securities and Exchange Commission, such provision shall
be deemed to incorporate the effect of such rule, regulation,
order or interpretation.
12. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust is 000 Xxxxx
Xxxxxxx Xxx., Xxxxx 000 Xxxxx, Xx. Xxxxx, XX 00000, and your address for this
purpose shall be 000 Xxxxx Xxxxxxx Xxx., Xxxxx 000 Xxxxx, Xx. Xxxxx, XX 00000.
13. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
14. BINDING EFFECT
Each of the undersigned expressly warrants and represents that he has the
full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
15. CAPTIONS
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.
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,
ATTEST: Sparrow Funds
/s/ By /s/
Xxxxxx X. Xxxxxxx, President
Name/Title: Xxxx Xxxxx, Secretary
Dated: September 16, 1998
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: Sparrow Capital Management Incorporated
/s/ By /s/
Xxxxxx X. Xxxxxxx, President
Name/Title: Xxxx Xxxxx
Dated: September 16, 1998
