MANAGEMENT AGREEMENT
TO: Xxxxx Investment Research, Inc.
X.X. Xxx 0
Xxxxx, Xxxx 00000
Dear Sirs:
The Xxxxx Advantage 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: the Xxxxx
Rainbow 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 upon the date of the execution of this Agreement.
1. ADVISORY SERVICES
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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 of Trustees of the Trust (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
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You will pay the compensation and expenses of any persons
rendering any services to the Fund who are officers, directors, stockholders or
employees of your corporation and will make available, without expense to the
Fund, the services of such of your employees as may duly be elected officers or
trustees of the Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any officers,
trustees and employees of the Trust who are not officers, directors, employees
or stockholders of your corporation will be paid by the Fund. You will pay all
advertising and promotion expenses incurred in connection with the sale or
distribution of the Fund's shares to the extent such expenses are not permitted
to be paid by the Fund under any distribution expense plan or any other
permissible arrangement which may be adopted in the future; provided however,
that neither the cost of prospectuses or periodic reports provided to
shareholders, nor expenses incurred in complying with laws regulating the issue
or sale of securities shall be deemed expenses incurred in connection with the
sale or distribution of the Fund's shares. 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.
The Fund will pay all organizational and operating expenses of the
Fund, including brokerage fees and commissions; taxes or governmental fees;
interest; fees and expenses of the non- interested person trustees; 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; insurance expenses;
fees and expenses of the custodian, transfer agent, dividend disbursing agent,
shareholder service 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 shareholders; expenses of shareholders' meetings and proxy
solicitations; and such extraordinary or non-recurring expenses as may arise,
including litigation to which the Fund may be a party and indemnification of the
Trust's trustees and officers with respect thereto.
Notwithstanding anything herein to the contrary, the Fund will only be
liable for organizational expenses when the Fund reaches $10,000,000 in assets
or when the Fund has been in existence for at least one year, and until such
time, you are liable for such expenses. You will cause such expenses to be
advanced on behalf of the Fund and may obtain reimbursement from the Fund after
the Fund becomes liable.
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 0.55% 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.
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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
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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 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 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 or agent of
you, or one under your control or direction, even though paid by you.
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6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall take effect on the date of its execution
by you, 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 names
"Xxxxx Rainbow," "Xxxxx Advantage," or any variation thereof, belongs 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 names "Xxxxx Rainbow," "Xxxxx
Advantage," or any variation thereof, 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 names "Xxxxx Rainbow," "Xxxxx
Advantage," or any variation thereof, 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 these names.
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
current 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.
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9. LIMITATION OF LIABILITY TO TRUST PROPERTY
-----------------------------------------
The term "The Xxxxx Advantage 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 rules, regulations or orders of the
Securities and Exchange Commission issued pursuant to said Act. In addition,
where the effect of a requirement of the Act, reflected in any provision of this
Agreement is revised by rule, regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
12. NOTICES
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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
0000 Xxxxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxx 00000, and your address for this purpose
shall be X.X. Xxx 0, Xxxxx, Xxxx 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.
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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
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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,
The Xxxxx Advantage Funds
By____________________________
Xxxxx Xxx Xxxxx, President
Dated: _________________, 1997
ACCEPTANCE
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The foregoing Agreement is hereby accepted.
Xxxxx Investment Research, Inc.
By ________________________________
Xxxxxxx X. Xxxxx, Xx., President
Dated: _______________, 1997
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