INVESTMENT COMPANY SERVICES AGREEMENT
The Avalon Fund of Xxx Arbor, Inc.
This AGREEMENT, dated as of the 15th day of July, 1998 , made by and between The
Avalon Fund of Xxx Arbor, Inc. ("Fund"), a corporation operating as an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), duly organized and existing under the laws of the
State of Maryland, Questar Capital Corporation ("Adviser"), a corporation duly
organized under the laws of the State of Michigan, and Declaration Service
Company ("Declaration"), a corporation duly organized under the laws of the
Commonwealth of Pennsylvania (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund is authorized by its Articles of Incorporation and
By-Laws to issue separate series of shares representing interests in separate
investment portfolios which are identified on Schedule "C" attached hereto and
which Schedule "C" may be amended from time to time by mutual agreement of the
Fund and Declaration; and
WHEREAS, the Fund and the Adviser have entered into an "Operating Services
Agreement" dated as of July 15, 1998, authorizing the Adviser to provide certain
investment company services to the Fund, and which further authorizes the
Adviser to enter into this Investment Company Services Agreement (hereafter
"Agreement") on behalf of the Fund; and WHEREAS, the Parties desire to enter
into an agreement whereby Declaration will provide the services to the Fund as
specified herein and set forth in particular in Schedule "A" which is attached
hereto and made a part hereof.
NOW THEREFORE, in consideration of the premises and mutual covenants
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contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
GENERAL PROVISIONS
Section 1. Appointment. The Adviser hereby appoints Declaration as servicing
agent to the Fund and Declaration hereby accepts such appointment. In order that
Declaration may perform its duties under the terms of this Agreement, the Board
of Directors of the Fund shall direct the officers, investment adviser, legal
counsel, independent accountants and custodian of the Fund to cooperate fully
with Declaration and, upon request of Declaration, to provide such information,
documents and advice relating to the Fund which Declaration requires to execute
its responsibilities hereunder. In connection with its duties, Declaration shall
be entitled to rely, and will be held harmless by the Fund when acting in
reasonable reliance, upon any instruction, advice or document relating to the
Fund as provided to Declaration by any of the aforementioned persons on behalf
of the Fund. All fees charged by any such persons acting on behalf of the Fund
will be deemed an expense of the Fund.
Any services performed by Declaration under this Agreement will conform to
the requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended,
and any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Articles of Incorporation and the By-Laws as
amended from time to time and delivered to Declaration;
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(d) any policies and determinations of the Board of Directors of the Fund
which are communicated to Declaration; and
(e) the policies of the Fund as reflected in the Fund's registration
statement as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent Declaration or any officer thereof
from providing the same or comparable services for or with any other person,
firm or corporation. While the services supplied to the Fund may be different
than those supplied to other persons, firms or corporations, Declaration will
provide the Fund equitable treatment in supplying services. The Fund recognizes
that it will not receive preferential treatment from Declaration as compared
with the treatment provided to other Declaration clients.
Section 2. Duties and Obligations of Declaration.
Subject to the provisions of this Agreement, Declaration will provide to
the Fund the specific services as set forth in Schedule "A" attached hereto.
Section 3. Definitions. For purposes of this Agreement:
"Certificate" will mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement. To be effective, such
Certificate shall be given to and received by the custodian and shall be signed
on behalf of the Fund by any two of its designated officers, and the term
Certificate shall also include instructions communicated to the custodian by
Declaration.
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"Custodian" will refer to that agent which provides safekeeping of the
assets of the Fund.
"Instructions" will mean communications containing instructions transmitted
by electronic or telecommunications media including, but not limited to,
Industry Standardization for Institutional Trade Communications,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an officer or unsigned) and tested telex.
"Oral Instruction" will mean an authorization, instruction, approval, item
or set of data, or information of any kind transmitted to Declaration in person
or by telephone, telegram, telecopy or other mechanical or documentary means
lacking original signature, by a person or persons reasonably identified to
Declaration to be a person or persons so authorized by a resolution of the Board
of Directors of the Fund to give Oral Instructions to Declaration on behalf of
the Fund.
"Shareholders" will mean the registered owners of the shares of the Fund in
accordance with the share registry records maintained by Declaration for the
Fund.
"Shares" will mean the issued and outstanding shares of the Fund.
"Signature Guarantee" will mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
Broker-dealers guaranteeing signatures must be members of a clearing corporation
or maintain net capital of at least $100,000. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
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signature guarantee program.
"Written Instruction" will mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Declaration in an
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Declaration to be the signature of a person or persons so
authorized by a resolution of the Board of Directors of the Fund, or so
identified by the Fund to give Written Instructions to Declaration on behalf of
the Fund.
Concerning Oral and Written Instructions For all purposes under this
Agreement, Declaration is authorized to act upon receipt of the first of
any Written or Oral Instruction it receives from the Fund or its agents. In
cases where the first instruction is an Oral Instruction that is not in the
form of a document or written record, a confirmatory Written Instruction or
Oral Instruction in the form of a document or written record shall be
delivered. In cases where Declaration receives an Instruction, whether
Written or Oral, to enter a portfolio transaction onto the Fund's records,
the Fund shall cause the broker/dealer executing such transaction to send a
written confirmation to the Custodian.
Declaration shall be entitled to rely on the first Instruction received.
For any act or omission undertaken by Declaration in compliance therewith,
it shall be free of liability and fully indemnified and held harmless by
the Fund, provided however, that in the event a Written or Oral Instruction
received by Declaration is countermanded by a subsequent Written or Oral
Instruction received prior to acting upon such countermanded Instruction,
Declaration shall act upon such subsequent Written or Oral Instruction. The
sole obligation of Declaration with respect to any follow-up or
confirmatory Written Instruction or Oral Instruction in documentary or
written form shall be to make reasonable efforts
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to detect any such discrepancy between the original Instruction and such
confirmation and to report such discrepancy to the Fund. The Fund shall be
responsible and bear the expense of its taking any action, including any
reprocessing, necessary to correct any discrepancy or error. To the extent
such action requires Declaration to act, the Fund shall give Declaration
specific Written Instruction as to the action required.
The Fund will file with Declaration a certified copy of each resolution of
the Fund's Board of Directors authorizing execution of Written Instructions
or the transmittal of Oral Instructions as provided above.
Section 4. Indemnification.
(a) Declaration, its directors, officers, employees, shareholders, and
agents will be liable for any loss suffered by the Fund resulting from the
willful misfeasance, bad faith, gross negligence or reckless disregard on the
part of Declaration in the performance of its obligations and duties under this
Agreement.
(b) Any director, officer, employee, shareholder or agent of Declaration,
who may be or become an officer, director, employee or agent of the Fund, will
be deemed, when rendering services to the Fund, or acting on any business of the
Fund (other than services or business in connection with Declaration' duties
hereunder), to be rendering such services to or acting solely for the Fund and
not as a director, officer, employee, shareholder or agent of, or under the
control or direction of Declaration even though such person may be receiving
compensation from Declaration.
(c) The Fund agrees to indemnify and hold Declaration harmless, together
with its directors, officers, employees, shareholders and agents from and
against any and all claims,
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demands, expenses and liabilities (whether with or without basis in fact or law)
of any and every nature which Declaration may sustain or incur or which may be
asserted against Declaration by any person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Declaration except
claims, demands, expenses and liabilities arising from willful misfeasance, bad
faith, negligence or reckless disregard on the part of Declaration in the
performance of its obligations and duties under this Agreement; or
(ii) any action taken or omitted to be taken by Declaration in
reliance upon any Certificate, instrument, order or stock certificate or other
document reasonably believed by Declaration to be genuine and signed,
countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Fund, or
upon the written opinion of legal counsel for the Fund or Declaration; or
(iii) the offer or sale of shares of the Fund to any person, natural
or otherwise, which is in violation of any state or federal law.
If a claim is made against Declaration as to which Declaration may seek
indemnity under this Section, Declaration will notify the Fund promptly after
receipt of any written assertion of such claim threatening to institute an
action or proceeding with respect thereto and will notify the Fund promptly of
any action commenced against Declaration within ten (10) days after Declaration
has been served with a summons or other legal process. Failure to notify the
Fund will not, however, relieve the Fund from any liability which it may have on
account of the indemnity under this Section so long as the Fund has not been
prejudiced in any material respect by such failure.
The Fund and Declaration will cooperate in the control of the defense of
any action,
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suit or proceeding in which Declaration is involved and for which indemnity is
being provided by the Fund to Declaration. The Fund may negotiate the settlement
of any action, suit or proceeding subject to Declaration's approval, which will
not be unreasonably withheld. Declaration reserves the right, but not the
obligation, to participate in the defense or settlement of a claim, action or
proceeding with its own counsel. Costs or expenses incurred by Declaration in
connection with, or as a result of such participation, will be borne solely by
the Fund if:
(i) Declaration has received an opinion of counsel from counsel to the
Fund stating that the use of counsel to the Fund by Declaration would present an
impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both Declaration and the Fund, and legal counsel to Declaration has
reasonably concluded that there are legal defenses available to it which are
different from or additional to those available to the Fund or which may be
adverse to or inconsistent with defenses available to the Fund (in which case
the Fund will not have the right to direct the defense of such action on behalf
of Declaration); or
(iii) the Fund authorizes Declaration to employ separate counsel at
the expense of the Fund.
(d) The terms of this Section will survive the termination of this
Agreement.
Section 5. Representations and Warranties.
(a) Declaration represents and warrants that:
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(i) it is a corporation duly organized and existing and in good
standing under the laws of Pennsylvania;
(ii) it is empowered under applicable laws and by its Certificate of
Incorporation and By-Laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to authorize
Declaration to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities,
personnel and equipment required to fully perform its duties and obligations
hereunder;
(v) no legal or administrative proceedings have been instituted or
threatened which would impair Declaration's ability to perform its duties and
obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or obligation of
Declaration or any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section 17A(c)(2) of
the Exchange Act;
(viii) this Agreement has been duly authorized by Declaration and,
when executed and delivered, will constitute valid, legal and binding obligation
of Declaration, enforceable in accordance with its terms.
(b) The Fund represents and warrants that:
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(i) it is a business Fund duly organized and existing and in good
standing under the laws of the State of Maryland;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the Fund
to enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its duties and
obligations under this Agreement;
(v) the Fund's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or obligations of the
Fund, or any law or regulation applicable to either;
(vi) the Shares are properly registered or otherwise authorized for
issuance and sale;
(vii) this Agreement has been duly authorized by the Fund and, when
executed and delivered, will constitute valid, legal and binding obligation of
the Fund, enforceable in accordance with its terms.
(c) Delivery of Documents
The Fund will furnish or cause to be furnished to Declaration the following
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documents:
(i) current Prospectus and Statement of Additional Information;
(ii) most recent Annual Report;
(iii) most recent Semi-Annual Report for registered investment
companies on Form N-SAR;
(iv) certified copies of resolutions of the Fund's Board of Directors
authorizing the execution of Written Instructions or the
transmittal of Oral Instructions and those persons authorized to
give those Instructions.
(d) Record Keeping and Other Information
Declaration will create and maintain all records required of it pursuant to
its duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Fund and will be
available during regular business hours for inspection, copying and use by the
Fund. Where applicable, such records will be maintained by Declaration for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, Declaration will deliver all such records to the Fund or such
person as the Fund may designate.
In case of any request or demand for the inspection of the Share records of
the Fund, Declaration shall notify the Fund and secure instructions as to
permitting or refusing such inspection. Declaration may, however, exhibit such
records to any person in any case where it
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is advised by its counsel that it may be held liable for failure to do so.
Section 6. Compensation. The Adviser agrees to pay Declaration compensation for
its services, and to reimburse it for expenses at the rates, times, manner and
amounts as set forth in Schedule "B" attached hereto and incorporated herein by
reference and as will be set forth in any amendments to such Schedule "B" agreed
upon in writing by the Parties. Upon receipt of an invoice therefor, the Adviser
agrees to pay such fees within five (5) business days. In addition, the Adviser
agrees to reimburse Declaration for any out-of-pocket expenses paid by
Declaration on behalf of the Fund within ten (10) calendar days of the Fund's
receipt of an invoice therefor.
For the purpose of determining fees payable to Declaration, the value of
the Fund's net assets will be computed at the times and in the manner specified
in the Fund's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Fund seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to this Agreement specifying the additional services
and corresponding compensation will be executed by the Parties.
In the event that Adviser is more than sixty (60) days delinquent in its
payments of monthly xxxxxxxx in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty (30) days' written notice by
Declaration. The Adviser must notify Declaration in writing of any contested
amounts within thirty (30) days of receipt of a billing for such amounts.
Disputed amounts are not due and payable while they are being disputed.
Section 7. Days of Operation. Nothing contained in this Agreement is intended to
or will
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require Declaration, in any capacity hereunder, to perform any functions or
duties on any holiday, day of special observance or any other day on which the
New York Stock Exchange ("NYSE") is closed. Functions or duties normally
scheduled to be performed on such days will be performed on and as of the next
succeeding business day on which the NYSE is open. Notwithstanding the
foregoing, Declaration will compute the net asset value of the Fund on each day
required pursuant to Rule 22c-1 promulgated under the Act.
Section 8. Acts of God, etc. Declaration will not be liable or responsible for
delays or errors caused by acts of God or by reason of circumstances beyond its
control including, acts of civil or military authority, national emergencies,
labor difficulties, mechanical breakdown, insurrection, war, riots, or failure
or unavailability of transportation, communication or power supply, fire, flood
or other catastrophe.
In the event of equipment failures beyond Declaration's control,
Declaration will, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but will have no liability with respect thereto.
The foregoing obligation will not extend to computer terminals located outside
of premises maintained by Declaration. Declaration has entered into and
maintains in effect agreements making reasonable provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
Section 9. Inspection and Ownership of Records. In the event of a request or
demand for the inspection of the records of the Fund, Declaration will use its
best efforts to notify the Fund and to secure instructions as to permitting or
refusing such inspection. Declaration may, however, make such records available
for inspection to any person in any case where it is advised in writing by its
counsel that it may be held liable for failure to do so after notice to the
Fund.
Declaration recognizes that the records it maintains for the Fund are the
property of
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the Fund and will be surrendered to the Fund upon written notice to Declaration
as outlined under Section 10(c) below. The Fund is responsible for the payment
in advance of any fees owed to Declaration. Declaration agrees to maintain the
records and all other information of the Fund in a confidential manner and will
not use such information for any purpose other than the performance of
Declaration' duties under this Agreement.
Section 10. Duration and Termination.
(a) The initial term of this Agreement will be for the period of two (2)
years, commencing on the date hereinabove first written (the "Effective Date")
and will continue thereafter subject to termination by either Party as set forth
in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be
fixed for the initial term commencing on the Effective Date of this Agreement
and will continue thereafter subject to their review and any adjustment.
(c) After the initial term of this Agreement, a Party may give written
notice to the other (the day on which the notice is received by the Party
against which the notice is made shall be the "Notice Date") of a date on which
this Agreement shall be terminated ("Termination Date"). The Termination Date
shall be set on a day not less than ninety (90) days after the Notice Date. The
period of time between the Notice Date and the Termination Date is hereby
identified as the "Notice Period". Any time up to, but not later than fifteen
(15) days prior to the Termination Date, the Adviser or Associates will pay to
Declaration such compensation as may be due as of the Termination Date and will
likewise reimburse Declaration for any out-of-pocket expenses and disbursements
reasonably incurred or expected to be incurred by Declaration up to and
including the Termination Date.
(d) In connection with the termination of this Agreement, if a successor to
any of
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Declaration' duties or responsibilities under this Agreement is designated by
the Fund by written notice to Declaration, Declaration will promptly, on the
Termination Date and upon receipt by Declaration of any payments owed to it as
set forth in Section 10(c) above, transfer to the successor, at the Adviser's
expense, all records which belong to the Fund and will provide appropriate,
reasonable and professional cooperation in transferring such records to the
named successor.
(e) Should the Fund desire to move any of the services outlined in this
Agreement to a successor service provider prior to the Termination Date,
Declaration shall make a good faith effort to facilitate the conversion on such
prior date, however, there can be no guarantee that Declaration will be able to
facilitate a conversion of services prior to the end of the Notice Period.
Should services be converted to a successor service provider prior to the end of
the Notice Period, or if the Fund is liquidated or its assets merged or
purchased or the like with another entity, payment of fees to Declaration shall
be accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained at Declaration until the expiration
of the Notice Period and shall be calculated at the asset levels on the Notice
Date.
(f) Notwithstanding any other provisions of Paragraph 10, and after the
passage of one (1) year from the date of the Agreement, in the event the Fund
deregisters as an Investment Company with the United States Securities and
Exchange Commission ("SEC"), this Agreement may be terminated by the Fund upon
ninety (90) days written notice to Declaration. The Termination Date shall be
ninety (90) days after the receipt of such notice by Declaration. Any time up
to, but not later than fifteen (15) days prior to the Termination Date, the
Adviser will pay to Declaration such compensation as may be due as of the
Termination Date and will likewise reimburse Declaration for any out-of-pocket
expenses and disbursements reasonably incurred or expected to be incurred by
Declaration up to and including the Termination Date.
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(g) Notwithstanding the foregoing, this Agreement may be terminated at any
time by either Party in the event of a material breach by the other Party
involving negligence, willful misfeasance, bad faith or a reckless disregard of
its obligations and duties under this Agreement provided that such breach shall
have remained unremedied for sixty (60) days or more after receipt of written
specification thereof.
Section 11. Rights of Ownership. All computer programs and procedures developed
to perform services required to be provided by Declaration under this Agreement
are the property of Declaration. All records and other data except such computer
programs and procedures are the exclusive property of the Fund and all such
other records and data will be furnished to the Fund in appropriate form as soon
as practicable after termination of this Agreement for any reason.
Section 12. Amendments to Documents. The Fund will furnish Declaration written
copies of any amendments to, or changes in, the Articles of Incorporation,
By-Laws, Prospectus or Statement of Additional Information in a reasonable time
prior to such amendments or changes becoming effective. In addition, the Fund
agrees that no amendments will be made to the Prospectus or Statement of
Additional Information of the Fund which might have the effect of changing the
procedures employed by Declaration in providing the services agreed to hereunder
or which amendment might affect the duties of Declaration hereunder unless the
Fund first obtains Declaration' approval of such amendments or changes.
Section 13. Confidentiality. Both Parties hereto agree that any non-public
information obtained hereunder concerning the other Party is confidential and
may not be disclosed to any other person without the consent of the other Party,
except as may be required by applicable law or at the request of the U.S.
Securities and Exchange Commission or other governmental agency. Declaration
agrees that it will not use any non-public information for any purpose other
than performance of its duties or obligations hereunder. The obligations of the
Parties
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under this Section will survive the termination of this Agreement. The Parties
further agree that a breach of this Section would irreparably damage the other
Party and accordingly agree that each of them is entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of this provision.
Section 14. Notices. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement will be in writing and will be delivered in person or sent by
first class mail, postage prepaid or by prepaid overnight delivery service to
the respective parties as follows:
If to the Fund:
The Avalon Fund of Xxx Arbor, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
President
If to the Adviser:
Questar Capital Corporation
0000 Xxxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
President
If to Declaration:
Declaration Service Company
000 Xxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx
President
Section 15. Amendment. No provision of this Agreement may be amended or modified
in any manner except by a written agreement properly authorized and executed by
the Parties.
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This Agreement may be amended from time to time by supplemental agreement
executed by the Parties and the compensation stated in Schedule "B" attached
hereto may be adjusted accordingly as mutually agreed upon.
Section 16. Authorization. The Parties represent and warrant to each other that
the execution and delivery of this Agreement by the undersigned officer of each
Party has been duly and validly authorized; and when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
each Party.
Section 17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed will be deemed to be an original,
but such counterparts will together constitute but one and the same instrument.
Section 18. Assignment. This Agreement will extend to and be binding upon the
Parties hereto and their respective successors and assigns; provided, however,
that this Agreement will not be assignable by any of the parties without the
written consent of the other parties, which consents shall be authorized or
approved by a resolution by its respective Boards of Directors.
Section 19. Governing Law. This Agreement will be governed by the laws of the
State of Pennsylvania and the exclusive venue of any action arising under this
Agreement will be Xxxxxxxxxx County, Commonwealth of Pennsylvania.
Section 20. Severability. If any part, term or provision of this Agreement is
held by any court to be illegal, in conflict with any law or otherwise invalid,
the remaining portion or portions will be considered severable and not be
affected and the rights and obligations of the parties will be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid, provided that the basic agreement is
not thereby materially impaired.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of eighteen (18) typewritten pages, together with Schedules "X," "X"
and "C" (Pages 19-26, attached), to be signed by their duly authorized officers
as of the day and year first above written.
The Avalon Fund of Xxx Arbor, Inc.
---------------------------
By: Xxxxxx X. Xxxxx
President
Questar Capital Corporation
---------------------------
By: Xxxxxx X. Xxxxx
President
Declaration Service Company
---------------------------
By: Xxxxxxx X. Xxxxx
President
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SCHEDULE A
Accounting Services Provided by Declaration Service Company
--------------------------------------------------------------------------------
o Journalize each Portfolio's investment, capital share and income and
expense activities.
o Verify investment buy/sell trade tickets when received from the adviser and
transmit trades to the Fund's custodian for proper settlement.
o Maintain individual ledgers for investment securities.
o Maintain historical tax lots for each security.
o Reconcile cash and investment balances of each Portfolio with the
custodian, and provide the adviser with the beginning cash balance
available for investment purposes.
o Update the cash availability throughout the day as required by the adviser.
o Post to and prepare each Portfolio's Statement of Assets and Liabilities
and Statement of Operations.
o Calculate expenses payable pursuant to the Fund's various contractual
obligations.
o Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund.
o Calculate capital gains and losses.
o Determine each Portfolio's net income.
o At the Portfolio's expense, obtain security market prices or if such market
prices are not readily available, then obtain such prices from services
approved by the adviser, and in either case calculate the market or fair
value of each Portfolio's investments.
o Where applicable, calculate the amortized cost value of debt instruments.
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o Transmit or mail a copy of the portfolio valuations to the adviser.
o Compute the net asset value of each Portfolio.
o Report applicable net asset value and performance data to performance
tracking organizations.
o Compute each Portfolio's yields, total returns, expense ratios and
portfolio turnover rate.
o Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments.
o Prepare monthly financial statements, which will include, without
limitation, the Schedule of Investments, the Statement of Assets and
Liabilities, the Statement of Operations, the Statement of Changes in Net
Assets, the Cash Statement, and the Schedule of Capital Gains and Losses.
o Prepare monthly security transactions listings.
o Prepare monthly broker security transactions summaries.
o Supply various Fund and Portfolio statistical data as requested on an
ongoing basis.
o Assist in the preparation of support schedules necessary for completion of
Federal and state tax returns.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports with the SEC on Form N-SAR.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports to shareholders and proxy statements.
o Assist with the preparation of amendments to the Fund's Registration
Statements on From N-1A and other filings relating to the registration of
shares.
o Monitor each Portfolio's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended from time to
time ("Code").
o Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the
qualification as a regulated investment
21
company of each Portfolio of the Fund under the Code.
o Provide other accounting services as may be agreed upon from time to time
in writing by the Fund and Declaration.
Administrative Services Provided by Declaration Service Company
--------------------------------------------------------------------------------
o Provide overall day-to-day Fund administrative management, including
coordination of investment adviser, custodian, transfer agency,
distribution and pricing and accounting services.
o Preparation and filing of all Federal and State reports including:
o Fund's post-effective amendments under the Securities Act of 1933 and
the Investment Company Act of 1940.
o Form N-SAR - Semi-Annual report for Registered Investment Companies.
o The Fund's Annual and Semi-Annual Report.
o Rule 24f-2 Notice - filing regarding sale(s) of securities.
o Rule 17g-1 filing with the SEC regarding Fidelity Bond coverage.
o Ongoing monitoring and filing of State Blue Sky registrations.
o Prepare and file such reports, applications and documents as may be
necessary or desirable to register the Fund's shares with the Federal and
state securities authorities, and monitor the sale of Fund shares for
compliance with Federal and state securities laws.
o Prepare and file reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy
statements, proxies and other reports to shareholders.
o Assist with layout and printing of shareholder communications, including
Prospectuses and reports to shareholders.
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o Administer contracts on behalf of the Fund with, among others, the Fund's
investment adviser, custodian, transfer agent/shareholder servicing agent,
distributor, and accounting services agent.
o Prepare and maintain materials for directors/management meetings including,
agendas, minutes, attendance records and minute books.
o Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
o Monitor and pay Fund bills, maintain Fund budget and report budget expenses
and variances to Fund management.
o Monitor the Fund's compliance with the investment restrictions and
limitations imposed by the 1940 Act and state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental investment
policies and limitations set forth in the Fund's Prospectuses and Statement
of Additional Information, and the investment restrictions and limitations
necessary for each Portfolio of the Fund to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended, or any successor statute.
o Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
o Provide administrative services as may be agreed from time to time in
writing by Declaration.
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Transfer Agent, Shareholder Servicing Agent and Dividend Disbursing Agent
Services provided by Declaration Service Company
--------------------------------------------------------------------------------
o Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions automatic
withdrawals, and wire order trades.
o Reinvest or pay dividends and make other distributions.
o Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
o Process and confirm address changes.
o Process standard account record changes as required, i.e. Dividend Codes,
etc.
o Microfilm and/or store source documents for transactions, such as account
applications and correspondence.
o Perform backup withholding for those accounts in accordance with Federal
regulations.
o Solicit missing taxpayer identification numbers.
o Provide remote access inquiry to Fund records via Fund supplied hardware
(fund responsible for connection line and monthly fee).
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o Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
o Name and address, including zip code.
o Balance of Shares.
o Number of Shares, issuance date of each share outstanding and
cancellation date of each share no longer outstanding, if issued.
o Balance of dollars available for redemption.
o Dividend code (daily accrual, monthly reinvest, monthly cash or
quarterly cash).
o Type of account code.
o Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
o Original establishment date for accounts opened by exchange.
o W-9 withholding status and periodic reporting.
o State of residence code.
o Social security or taxpayer identification number, and indication of
certification.
o Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time to time.
o Indication as to whether phone transaction can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
o Provide the following reports and statements:
o Prepare daily journals for Fund reflecting all shares and dollar
activity for the previous day.
o Supply information monthly for Fund's preparation of Blue Sky
reporting.
o Supply monthly purchase, redemption and liquidation information for
use in Fund's N-SAR report.
o Provide monthly average daily balance reports for the Fund.
o Prepare and mail copies of summary statements to dealers and
investment advisers.
o Mail transaction confirmation statements daily to investors.
o Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent).
o Mail periodic statement to investors.
o Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S.
o Enclose various marketing material as designated by the Fund in
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statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent).
o Prepare and mail confirmation statements to dealers daily.
o Prepare certified list of stockholders for proxy mailing.
SCHEDULE B
Compensation Schedule for Services Provided by Declaration Service Company
Per Portfolio
-------------
0.20% on first $25 million of average annual assets
0.15% on next $25 million of average annual assets
0.10% on next $50 million of average annual assets
0.075% in excess of $100 million of average annual assets
Transfer Agent/ Shareholder Services:
-------------------------------------
$ 7.50 per Shareholder Account
Minimum annual fees:
--------------------
Year one (1) $ 42,000 (normal minimum reduced by 25%, per agreement)
Year two (2) 67,000
Year three (3) 78,000
Thereafter 89,000
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Plus out-of-pocket expenses to include, but not limited to: wire fees, bank
service charges, printing, copying, postage, courier, account statement/
confirmation (including programming costs for specialized statements/
confirmations), Fund/SERV and Networking Costs, portfolio price quotation
service, asset allocation charges, travel, telephone, registration fees, and
other standard miscellaneous items.
Additional classes of shares per portfolio
Each category of fee ( including annual minimums) increases by 50% for the
second class of shares per portfolio, and by 25% for each additional class of
shares per portfolio.
SCHEDULE C
The Avalon Fund of Xxx Arbor, Inc.
Portfolios covered by this Agreement:
The Avalon Capital Appreciation Fund
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