ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT ("Agreement"), is made this
6th day of June, 2003, by and between THE PENNSYLVANIA
AVENUE FUNDS, a Delaware business trust (the "Fund"), and
PENNSYLVANIA AVENUE ADVISERS LLC, a District of Columbia
limited liability company (the "Administrator").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a non-
diversified open-end management investment company and is to
be registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, the Administrator is engaged in the business of
rendering administrative and supervisory services to
investment companies; and
WHEREAS, the Fund desires to retain the Administrator to
render supervisory and corporate administrative services to
the Fund in the manner and on the terms hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Employment of the Administrator. The Fund hereby employs
the Administrator to administer the affairs of the Fund
subject to the direction of the Board of Trustees and the
officers of the Fund, for the period and on the terms
hereinafter set forth. The Administrator hereby accepts such
employment and agrees during such period to render the
services and to assume the obligations herein set forth for
the compensation herein provided. The Administrator shall
devote such time as is necessary to carry out and shall at
all times faithfully, with diligence and to the best of its
ability, perform all of the duties required of it by the
Fund hereunder.
2. Obligations of the Administrator. The Administrator
shall, at its expense, establish and maintain separate books
of account and other records reasonably appropriate for the
operation of the business of the Fund, including such
entries and supporting documents as may be necessary or
appropriate for the purpose of showing all the transactions
made or committed on behalf of the Fund, and shall supervise
all accounting procedures and audits. All books and records
shall be maintained in such form and detail as may be
required by applicable law. The Administrator shall oversee
the maintenance of all books and records with respect to the
Fund's securities transactions and the Fund's book of
account in accordance with all applicable federal and state
laws and regulations. The Administrator, at its expense,
shall supply the Board of Trustees and officers of the Fund
with all statistical information and reports reasonably
required by it and reasonably available to the Administrator
and furnish the Fund with office facilities, including
space, furniture and equipment and all personnel reasonably
necessary for the operation of the Fund. In compliance with
the requirements of Rule 31a-3 under the Act, the
Administrator hereby agrees that any records which it
maintains for the Fund are the property of the Fund and
further agrees to surrender promptly to the Fund any of such
records upon the Fund's request. The Administrator further
agrees to arrange for the preservation of the records
required to be maintained by Rule 31a-1 under the Act for
the periods prescribed by Rule 31a-2 under the Act.
The Administrator covenants and agrees that it will
maintain, or will otherwise have available to it, facilities
and staff, including managerial, administrative and
technical, as shall be necessary and adequate, in all
material respects, to perform properly its obligations
hereunder.
3. Expenses of the Fund. The Administrator assumes and shall
pay for maintaining its staff and personnel, and shall at
its own expense provide the equipment, office space and
facilities necessary to perform its obligations under this
Agreement. In addition, the Administrator assumes and shall
pay all ordinary expenses of the Fund, including, without
limitation: (a) organizational costs, (b) compensation of
the Investment Adviser's personnel and payment of other
expenses in connection with provision of portfolio
management services, (c) compensation of any of the Fund's
trustees, officers or employees who are not interested
persons of the Investment Adviser or its affiliates, (d)
fees and expenses of registering the Fund's shares under the
federal securities laws and of qualifying its shares under
applicable state Blue Sky laws, including expenses attendant
upon renewing such registrations and qualifications, (e)
insurance premiums, (f) fidelity bonds, (g) accounting and
bookkeeping costs and expenses necessary to maintain the
Fund's books and records, (h) outside auditing and ordinary
legal expenses, (i) all costs associated with shareholders
meetings and the preparation and dissemination of proxy
solicitation materials, (j) costs of printing and
distribution of the Fund's Prospectus and other shareholder
information to existing shareholders, (k) charges, if any,
of custodian and dividend disbursing agent's fees, (l)
industry association fees, and (m) costs of independent
pricing services and calculation of daily net asset value.
The Administrator may, at its discretion, assume any
additional expenses ordinarily assumed by the Fund when it
determines that such action is in the best interest of the
shareholders. Any extraordinary and non-recurring expenses
shall be paid by the Fund.
4. Compensation. The Administrator shall render its services
pro xxxx. It is explicitly recognized that the Administrator
obtains a management fee as investment adviser of the Fund.
Irrespective of the foregoing, the Fund will reimburse the
Administrator for all reasonable out of pocket expenses.
5. Expense Limitation. If, in any fiscal year, the aggregate
expenses of the Fund (including advisory, administrative and
transfer agency fees, but excluding interest, local, state
and federal taxes), exceed the expense limitations of any
state having jurisdiction over the Fund, then the fee paid
to the Administrator hereunder will be reduced pro rata (but
not below zero) to the extent required by such expense
limitation. The Administrator will bear its pro rata share
of any such fee reduction based on the percentage that the
Administrator's fee bears to the total administrative and
advisory fees paid by the Fund to the Administrator and to
the investment adviser of the Fund, for the month and year
in which this Agreement becomes effective or terminates,
there shall be an appropriate proration of said fee
reduction based on the number of days that the Agreement is
in effect during such month and year, respectively.
6. Inspection of Books and Records. Manager shall, upon
reasonable notice, permit the Fund and its duly authorized
representatives to inspect and to audit, for any purposes
whatsoever, all of the books of account, documents, records,
papers and files in the custody or possession of the
Administrator relating in any manner to the business of the
Fund. All expenses involved in such audit or inspection will
be borne by the Fund.
7. Independent Contractor. The Administrator is for all
purposes hereunder an independent contractor, free from
control, direction or supervision of the Fund and any
persons engaged by the Administrator in the performance of
the Administrator's duties hereunder are solely the
employees or agents of the Administrator. The parties hereto
intend and contemplate that their relationship shall not be
construed, nor shall any provision of this Agreement be
interpreted, so as to create a partnership or joint venture
between them or their respective successors in interest and,
except as expressly provided or authorized, neither party
shall have the authority to act for, represent or bind the
other or otherwise be deemed an agent of the other.
8. Activities of the Administrator. The services of the
Administrator to the Fund hereunder are not to be deemed
exclusive and the Administrator shall be free to render
similar services to others. Subject to, and in accordance
with the Declaration of Trust and By-Laws of the Fund and
Section 10(a) of the Act, it is understood that trustees,
officers, agents and beneficial holders of the Fund are or
may be "interested persons" (as defined in the Act) of the
Administrator of its affiliates, and that directors,
officers, agents or shareholders of the Administrator of its
affiliates are or may be "interested persons" of the Fund as
beneficial holders or otherwise.
9. Limitation of Liability. In the absence of willful
misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of
the Administrator, the Administrator shall not be liable to
the Fund or to any beneficial holder of the Fund for any act
or omission in the course of, or in connection with,
rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
10. Term. This Agreement shall become effective on the
effective date of the first public offering of the Fund's
shares and shall continue in effect for one year and from
year to year thereafter only so long as specifically
approved annually by (i) the Fund's Board of Trustees and by
a vote of the holders of a majority of the outstanding
voting securities of the Fund, or (ii) a majority of the
Trustees who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party cast in
person at a meeting called for the purpose of voting on such
approval.
11. Termination. This Agreement may be terminated at any
time without the payment of any penalty (i) by the Fund
either by vote of the Board of Trustees of the Fund or by
vote of a majority of the outstanding voting securities of
the Fund, on 60 days written notice to the Administrator, or
(ii) by the Administrator on 60 days written notice to the
Fund.
12. Amendments. This Agreement may be amended by the parties
only if such amendment is specifically approved by (i) the
Board of Trustees of the Fund and by a vote of the holders
of a majority of the outstanding voting securities of the
Fund, or (ii) a majority of those trustees of the Fund 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.
13. Notices. Any notice required or desired to be given
hereunder shall be in writing and shall be considered
effective (i) when delivered, if by personal delivery, (ii)
upon receipt, if sent by FAX, which FAX has been
telephonically confirmed, between the hours of 9:00 a.m. and
5:00 p.m. local time of the recipient on a business day, or
if not, at 9:00 a.m., local time on the next business day,
or (iii) upon the earlier of actual or first attempted
delivery, if mailed, postage prepaid, addressed as follows:
If to the Administrator:
PENNSYLVANIA AVENUE ADVISERS LLC
0000 Xxxxxxxxxxxxx Xxxxxx XX
Xxxxxxxxxx, XX 00000
FAX No.: (000) 000-0000
Telephone No.: (000) 000 0000
If to the Fund:
THE PENNSYLVANIA AVENUE FUNDS
0000 Xxxxxxxxxxxxx Xxxxxx XX
Xxxxxxxxxx, XX 00000
FAX No.: (000) 000-0000
Telephone No.: (000) 000 0000
or to such other address as the party shall have furnished
in writing in accordance with the provisions of this Section
13.
14. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
hereof, and supersedes all prior negotiations or agreements,
whether written or oral.
15. Inurement. This Agreement shall inure to the benefit of
and be binding upon the Fund, the Administrator, and their
respective successors, transferees and assigns.
16. Assignment. Except as otherwise expressly provided
herein, the rights and obligations of the parties pursuant
to this Agreement may not be assigned without the express
written consent of the other party.
17. Severability. If any provision of this Agreement shall
be held, declared or pronounced void, voidable, invalid,
unenforceable or inoperative for any reason by any court of
competent jurisdiction, such holding, declaration or
pronouncement shall not adversely affect any other provision
of this Agreement, and this Agreement shall otherwise remain
in full force and effect and be enforced in accordance with
its terms, including in a manner that may be reasonably
required in order to render any provision that has been
held, declared or pronounced void, voidable, invalid,
unenforceable or inoperative to become valid, enforceable
and operative.
18. Counterparts. This Agreement shall be executed in
counterparts, in which case all such counterparts shall
constitute one and the same agreement.
19. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the District of
Columbia.
20. Attorneys' Fees. In the event any proceeding is brought
by one party against the other to enforce or for the breach
of any of the provisions of this Agreement, the prevailing
party shall be entitled in such proceeding and in any appeal
therefrom to recover reasonable attorneys' fees, together
with the costs of such proceeding therein incurred.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the date first written above.
Pennsylvania Avenue Funds By
/s/XXXXXX XXXXXXXX
_____________________________
Xxxxxx Xxxxxxxx, President
Pennsylvania Avenue Funds By
/s/XXXX XXXXXXXX
_____________________________
Xxxx Xxxxxxxx, Trustee
Pennsylvania Avenue Funds By
/s/XXXX WITOONCHATREE
_____________________________
Xxxx Witoonchatree, Trustee
Pennsylvania Avenue Advisers LLC By
/s/XXXXXX XXXXXXXX
_____________________________
Xxxxxx Xxxxxxxx,
Managing Member
