OPERATING SERVICES AGREEMENT
XXXXXX MUTUAL FUNDS, INC.
This Agreement is made and entered into as of the 30th day of November,
1999, by and between Xxxxxx Mutual Funds, Inc., a Maryland corporation (the
"Fund"), and Edgemoor Capital Management, Inc., a Maryland corporation
(hereinafter referred to as "Adviser").
WHEREAS, the Fund is an open-end management investment company, registered
under the Investment Company Act of 1940, as amended (the "Act"), and authorized
to issue shares representing interests in the Xxxxxx Focus Fund (the
"Portfolio"); and
WHEREAS, Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of asset management
and the provision of certain other administrative and recordkeeping services in
connection therewith; and
WHEREAS, the Fund wishes to engage Adviser, to provide, or arrange for the
provision of, certain operational services which are necessary for the
day-to-day operations of the Portfolio in the manner and on the terms and
conditions hereinafter set forth, and Adviser wishes to accept such engagement;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the Fund and Adviser agree as follows:
1. Obligations of Adviser
(a) Services. The Fund hereby retains Adviser to provide, or, upon
receipt of approval of the Fund, arrange for other companies to provide,
the following services to the Portfolio in the manner and to the extent
that such services are reasonably necessary for the operation of the
Portfolio (collectively, the "Services"):
(1) accounting services and functions, including costs and
expenses of any independent public accountants;
(2) non-litigation related legal and compliance services,
including the expenses of maintaining registration and qualification
of the Fund and the Portfolio under federal, state and any other
applicable laws and regulations;
(3) dividend disbursing agent, dividend reinvestment agent,
transfer agent, and registrar services and functions (including
answering inquiries related to shareholder Portfolio accounts);
(4) custodian and depository services and functions;
(5) distribution, marketing, and/or underwriting services;
(6) independent pricing services;
(7) preparation of reports describing the operations of the
Portfolio, including the costs of providing such reports to
broker-dealers, financial institutions and other organizations which
render services and assistance in connection with the distribution of
shares of the Portfolio;
(8) sub-accounting and recordkeeping services and functions
(other than those books and records required to be maintained by
Adviser under the Investment Advisory Agreement between the Fund and
Adviser), including maintenance of shareholder records and shareholder
information concerning the status of their Portfolio accounts by
investment advisers, broker-dealers, financial institutions, and other
organizations on behalf of Adviser;
(9) shareholder and board of directors communication services,
including the costs of preparing, printing and distributing notices of
shareholders' meetings, proxy statements, prospectuses, statements of
additional information, Portfolio reports, and other communications to
the Fund's Portfolio shareholders, as well as all expenses of
shareholders' and board of directors' meetings, including the
compensation and reimbursable expenses of the directors of the Fund;
(10) other day-to-day administrative services, including the
costs of designing, printing, and issuing certificates representing
shares of the Portfolio, and premiums for the fidelity bond maintained
by the Fund pursuant to Section 17(g) of the Act and rules promulgated
thereunder (except for such premiums as may be allocated to third
parties, as insureds thereunder).
(b) Exclusions from Service. Notwithstanding the provisions of
Paragraph 1(a) above, the Services shall not include and Adviser will not
be responsible for any of the following:
(1) all brokers' commissions, issue and transfer taxes, and other
costs chargeable to the Fund or the Portfolio in connection with
securities transactions to which the Fund or the Portfolio is a party
or in connection with securities owned by the Fund or the Portfolio;
(2) the interest on indebtedness, if any, incurred by the Fund or
the Portfolio;
(3) the taxes, including franchise, income, issue, transfer,
business license, and other corporate fees payable by the Fund or the
Portfolio to federal, state, county, city, or other governmental
agents;
(4) the expenses, including fees and disbursements of counsel, in
connection with litigation by or against the Fund or the Portfolio;
and
(5) any other extraordinary expense of the Fund or Portfolio.
(c) Books and Records. All books and records prepared and maintained
by Adviser for the Fund under this Agreement shall be the property of the
Fund and, upon request therefor, Adviser shall surrender to the Fund such
of the books and records so requested.
(d) Staff and Facilities. Adviser assumes and shall pay for
maintaining the staff, personnel, space, equipment and facilities
necessary to perform its obligations under this Agreement.
2. Obligations of the Fund
(a) Fee. The Fund will pay to the Adviser on the last day of each
month an annual fee equal to 0.50% of the average net assets of the
Portfolio, such fee to be computed daily based upon the net asset value of
the Portfolio as determined by a valuation made in accordance with the
Fund's procedure for calculating Portfolio net asset value as described in
the Fund's Prospectus and/or Statement of Additional Information. During
any period when the determination of a Portfolio's net asset value is
suspended by the directors of the Fund, the net asset value of a share of
that Portfolio as of the last business day prior to such suspension shall,
for the purpose of this Paragraph 2(a), be deemed to be the net asset
value at the close of each succeeding business day until it is again
determined.
(b) Information. The Fund will, from time to time, furnish or
otherwise make available to Adviser such information relating to the
business and affairs of the Portfolio as Adviser may reasonably require in
order to discharge its duties and obligations hereunder.
3. Term. This Agreement shall remain in effect initially for two years
after its execution, and from year to year thereafter provided such
continuance is approved at least annually by the vote of a majority of the
directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party, which vote must be
cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that:
(a) the Fund, at any time and without the payment of any penalty
terminate this Agreement upon 60 days written notice to Adviser;
(b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rules thereunder); and
(c) Adviser may terminate this Agreement without payment of penalty on
60 days written notice to the Fund.
4. Miscellaneous
(a) Performance Review. Adviser will permit representatives of the
Fund, including the Fund's independent auditors, to have reasonable access
to the personnel and records of Adviser in order to enable such
representatives to monitor the quality of services being provided and the
level of fees due Adviser pursuant to this Agreement. In addition, Adviser
shall promptly deliver to the board of directors of the Fund such
information as may reasonably be requested from time to time to permit the
board of directors to make an informed determination regarding
continuation of this Agreement and the payments contemplated to be made
hereunder.
(b) Notices. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, to the other party
at the principal office of such party.
(c) Choice of Law. This Agreement shall be construed in accordance
with the laws of the State of Maryland and the applicable provisions of
the Act. To the extent the applicable law of the State of Maryland or any
of the provisions herein conflict with the applicable provisions of the
Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
Xxxxxx Mutual Funds, Inc.
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, President
Edgemoor Capital Management, Inc.
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, President
