MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of __________, 1996 by and
between X'XXXXXXXXXXX FUNDS, INC., a Maryland corporation (hereinafter referred
to as the "Corporation"), on behalf of each of its investment series set forth
on Schedule A hereto as it may be amended from time to time (hereinafter
referred to each as a "Fund" and together, as the "Funds"), and X'XXXXXXXXXXX
CAPITAL MANAGEMENT, INC., a Maryland corporation (hereinafter referred to as the
"Manager").
W I T N E S S E T H:
WHEREAS, the Corporation is engaged in business as a
diversified open-end management investment company registered under the
Investment Company Act of 1940, as amended (hereinafter referred to as the
"Investment Company Act"); and
WHEREAS, the Manager is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940; and
WHEREAS, the Corporation on behalf of the Funds desires to
retain the Manager to provide management and investment advisory services to the
Funds in the manner and on the terms hereinafter set forth; and
WHEREAS, the Manager is willing to provide management and
investment advisory services to the Funds on the terms and conditions hereafter
set forth;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the Corporation, on behalf of the Funds, and
the Manager hereby agree as follows:
ARTICLE I
Duties of the Manageras a manager
The Corporation hereby employs the Manager to act as a manager
and investment adviser of the Funds and to furnish the management and investment
advisory services described below, subject to the policies of the Funds and the
review by and overall consent of the Board of Directors of the Corporation, for
the period and on the terms and conditions set forth in this Agreement. The
Manager hereby accepts such employment and agrees during such period, at its own
expense, to render, or arrange for the rendering of, such services and to assume
the obligations herein set forth for the compensation provided for herein. The
Manager 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 Corporation or the Funds in any way or otherwise be
deemed agents of the Corporation or the Funds. Additional investment series may
from time to time
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be added to those covered by this Agreement by the parties by executing a new
Schedule A which shall become effective upon its execution and shall supersede
any Schedule A having an earlier date.
(a) Management Services. The Manager shall perform the
management services necessary for the operation of the Funds as hereinafter
provided. The Manager shall generally monitor each Fund's compliance with
investment policies and restrictions as set forth in its currently effective
Prospectus and Statement of Additional Information relating to the shares of the
Fund under the Securities Act of 1933, as amended (each a "Prospectus" and
"Statement of Additional Information",- respectively). The Manager shall provide
the Corporation with such other services as the Manager, subject to review by
the Directors, shall from time to time determine to be necessary or useful to
perform its obligations under this Agreement. The Manager shall make reports to
the Directors of its performance of obligations hereunder and furnish advice and
recommendations with respect to such other aspects of the business and affairs
of the Corporation as it shall determine to be desirable.
(b) Investment Advisory Services. With respect to each Fund:
(i) The Manager shall provide such investment research,
advice and supervision as the Fund may from time to time consider necessary for
the proper supervision of the assets of the Fund, shall furnish continuously an
investment program for the Fund and shall determine from time to time which
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the Fund invests,
options, futures, options on futures or cash, subject always to the restrictions
of the Articles of Incorporation and ByLaws of the Corporation, as amended from
time to time, the provisions of the Investment Company Act and the statements
relating to the Fund's investment objectives, investment policies and investment
restrictions as the same are set forth in the Fund's currently effective
Prospectus and Statement of Additional Information. Should the Directors at any
time, however, make any definite determination as to investment policy and
notify the Manager thereof in writing, the Manager shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked.
(ii) To the extent applicable, the Manager shall also
make decisions for the Fund as to foreign currency matters and make
determinations as to foreign exchange contracts.
(iii) The Manager shall make decisions for the Fund as
to the manner in which voting rights, rights to consent to corporate action and
any other rights pertaining to the Fund's portfolio securities shall be
exercised.
(iv) The Manager shall take, on behalf of the Fund, all
actions which it deems necessary to implement the Fund's investment policies,
and in particular to place all orders for the purchase or sale of portfolio
securities for the Fund's account with brokers or dealers selected by it, and to
that end, the Manager is authorized as the agent of the Fund to give
instructions to the custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund.
(v) In connection with the selection of such brokers or
dealers and the placing of such orders with respect to assets of the Fund, the
Manager is directed at all times to seek to obtain execution and prices within
the policy guidelines determined by the Directors and set forth
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in the Fund's Prospectus and Statement of Additional Information. Subject to
this requirement and the provisions of the Investment Company Act, the
Securities Exchange Act of 1934, as amended, and other applicable provisions of
law, the Manager may select brokers or dealers with which it or the Corporation
is affiliated (if any).
ARTICLE II
Allocation of Charges and Expenses
(a) The Manager. The Manager assumes and shall pay for
maintaining the staff and personnel necessary to perform its obligations under
this Agreement, shall pay all compensation relating to service to the
Corporation of Officers and Directors of the Corporation who are affiliated
persons of the Manager, and shall pay the expenses of the Funds incurred in
connection with the continuous offering of Fund shares.
(b) The Corporation. Except as described in paragraph (a)
hereof, the Corporation, on behalf of each Fund, assumes and shall pay all other
Fund expenses, including, without limitation: taxes, expenses for legal and
auditing services, costs of printing proxies, stock certificates, shareholder
reports, Prospectuses and Statements of Additional Information, charges of the
custodian, any sub-custodian and transfer agent, expenses of portfolio
transactions, expenses of redemption of shares, Securities and Exchange
Commission fees, expenses of registering the shares under federal, state and
foreign laws, fees and actual out-of-pocket expenses of Directors who are not
affiliated persons of the Manager, accounting and pricing costs (including the
daily calculation of the net asset value), insurance, interest, brokerage costs,
litigation and other extraordinary or non-recurring expenses, and other expenses
properly payable by each Fund.
ARTICLE III
Compensation of the Manager
(a) Management and Investment Advisory Fee. For the services
rendered, the facilities furnished and expenses assumed by the Manager, each
Fund shall pay to the Manager at the end of each calendar month a fee,
commencing on the day following effectiveness hereof, based upon the average
daily value of the net assets of such Fund, as determined and computed in
accordance with the description of the determination of net asset value
contained in the relevant Prospectus and Statement of Additional Information.
The fee payable by each Fund is set forth on Schedule A hereto.
If this Agreement becomes effective subsequent to the first
day of a month or shall terminate before the last day of a month, compensation
for that part of the month that this Agreement is in effect shall be prorated in
a manner consistent with the calculation of the fee as set forth above. Subject
to the provisions of subsection (b) hereof, payment of the Manager's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by subsection (b) hereof. During any
period when the determination of net asset value
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is suspended by the Directors, the net asset value of a share as of the last
business day prior to such suspension shall for this purpose be deemed to be the
net asset value at the close of each succeeding business day until it is again
determined.
(b) Expense Limitations. In the event the operating expenses
of a Fund, including amounts payable to the Manager pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Fund imposed by
applicable state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, the Manager shall reduce its
management fee with respect to such Fund by the extent of such excess and, if
required pursuant to any such laws or regulations, will reimburse such Fund in
the amount of such excess; provided, however, to the extent permitted by law,
there shall be excluded from such expenses the amount of any interest, taxes,
brokerage fees and commissions, distribution fees and extraordinary expenses
(including but not limited to legal claims and liabilities and litigation costs
and any indemnification related thereto) paid or payable by such Fund. Whenever
the expenses of a Fund exceed a pro rata portion of the applicable annual
expense limitations, the estimated amount of reimbursement under such
limitations shall be applicable as an offset against the monthly payment of the
fee due to the Manager with respect to such Fund. Should two or more such
expense limitations be applicable at the end of the last business day of the
month, that expense limitation which results in the largest reduction in the
Manager's fee shall be applicable.
ARTICLE IV
Limitation of Liability of the Manager
The Manager shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of a Fund, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Article IV,
the term "Manager" shall include any directors, officers and employees of the
Manager.
ARTICLE V
Activities of the Manager
The services of the Manager to the Funds are not to be deemed
to be exclusive, and the Manager is free to render services to other investment
advisory clients. It is understood that Directors, officers, employees and
shareholders of the Corporation are or may become interested in the Manager, as
directors, officers, employees and shareholders or otherwise, and that
directors, officers, employees and shareholders of the Manager are or may become
similarly interested in the Corporation.
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ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first
above written and shall remain in force with respect to each Fund until ____,
1998 and thereafter, but only so long as such continuance is specifically
approved with respect to each Fund at least annually by: (i) the Directors, or
by the vote of a majority of the outstanding voting securities of the Fund, and
(ii) a majority of those Directors 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.
This Agreement may be terminated at any time with respect to a
Fund, without the payment of any penalty, by the Directors or by the vote of a
majority of the outstanding voting securities of such Fund, or by the Manager,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VII
Amendments of this Agreement
With respect to a Fund, this Agreement may be amended by the
parties only if such amendment is specifically approved by: (i) the vote of a
majority of outstanding voting securities of such Fund, and (ii) a majority of
those Directors 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.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting
securities," "assignment," "affiliated person" and "interested person," when
used in this Agreement, shall have the respective meanings specified in the
Investment Company Act and the rules thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
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ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of
the State of New York and the applicable provisions of the Investment Company
Act. To the extent that the applicable laws of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
X'XXXXXXXXXXX FUNDS, INC.
By:_____________________________
Name:
Title:
X'XXXXXXXXXXX CAPITAL MANAGEMENT, INC.
By:_____________________________
Name:
Title:
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Schedule A
Compensation
Name of Fund (as a % of average daily net assets)
------------ ------------------------------------
X'Xxxxxxxxxxx Cornerstone Valve Fund .......................0.74%
X'Xxxxxxxxxxx Cornerstone Growth Fund ......................0.74%
X'Xxxxxxxxxxx Aggressive Growth Fund .......................0.74%
X'Xxxxxxxxxxx Dogs of the Market(TM)Fund ...................0.74%
Date: ____________
X'XXXXXXXXXXX FUNDS, INC.
By:___________________________________
Name:
Title:
X'XXXXXXXXXXX CAPITAL MANAGEMENT, INC.
By:____________________________________
Name:
Title:
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