EXHIBIT 99(h)(1)
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT, dated as of this 8th day of August,
2002, (the "Agreement"), between THIRD AVENUE MANAGEMENT LLC, a Delaware limited
liability company ("TAM") and THIRD AVENUE VARIABLE SERIES TRUST (the "Fund"),
an open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act").
WHEREAS, the Fund desires to retain TAM to render certain
administrative services with respect to each investment portfolio listed in
Schedule A hereto, as the same may be amended from time to time by the parties
hereto (collectively, the "Portfolios"), and TAM is willing to render such
services;
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
Article 1 DEFINITIONS.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
officer of the Fund; or (ii) any person, whether or not such person is
an officer or employee of the Fund, duly authorized to give Oral
Instructions or Written Instructions on behalf of the Fund as indicated
in writing to TAM from time to time.
(c) "Board Members" shall mean the Directors or Trustees of
the governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(e) "Commission" shall mean the Securities and Exchange
Commission.
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(f) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custody Agreement.
(g) "1933 Act" shall mean the Securities Act of 1933 and the
rules and regulations promulgated thereunder, all as amended from time
to time.
(h) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(i) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by TAM from a person reasonably
believed by TAM to be an Authorized Person.
(j) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets.
(k) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the 1933
Act and the 1940 Act.
(l) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(m) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(n) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by TAM to be an Authorized
Person and actually received by TAM. Written Instructions shall include
manually executed originals and authorized electronic transmissions,
including telefacsimile of a manually executed original or other
process.
Article 2 APPOINTMENT OF TAM.
The Fund hereby appoints TAM to act as Administrator of the Fund on the
terms set forth in this Agreement. TAM accepts such appointment and agrees to
render the services herein set forth for the compensation herein provided.
Article 3 DUTIES OF TAM.
3.1 TAM shall be responsible for the following: performing the
customary services of an Administrator, including treasury and blue sky for the
Fund, as more fully described in the
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written schedule of Duties of TAM annexed hereto as Schedule B and incorporated
herein, and subject to the supervision and direction of the Fund.
3.2 In performing its duties under this Agreement, TAM: (a) will act in
accordance with the Articles of Incorporation, By-Laws, Prospectuses and with
the Oral Instructions and Written Instructions of the Fund and will conform to
and comply with the requirements of the 1940 Act and all other applicable
federal or state laws and regulations; and (b) will consult with legal counsel
to the Fund, as necessary and appropriate. Furthermore, TAM shall not, pursuant
to this Agreement, have or be required to have any authority to supervise the
investment or reinvestment of the securities or other properties which comprise
the assets of the Fund or any of its Portfolios and shall not provide any
investment advisory services to the Fund or any of its Portfolios.
3.3 In addition to the duties set forth herein, TAM shall perform such
other duties and functions, and shall be paid such amounts therefor, as may from
time to time be agreed upon in writing between the Fund and TAM.
Article 4 RECORDKEEPING AND OTHER INFORMATION.
4.1 TAM shall create and maintain all records required of it pursuant
to its duties hereunder and as set forth in Schedule B in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records shall be maintained by TAM
for the periods and in the places required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, TAM agrees
that all such records prepared or maintained by TAM relating to the services to
be performed by TAM hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such section, and
will be surrendered promptly to the Fund on and in accordance with the Fund's
request.
Article 5 FUND INSTRUCTIONS.
5.1 TAM will have no liability when properly acting upon Written or
Oral Instructions reasonably believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund.
5.2 At any time, TAM may request Written Instructions from the Fund and
may seek advice from legal counsel for the Fund, or its own legal counsel, with
respect to any matter arising in connection with this Agreement, and it shall
not be liable for any action properly taken or not taken or suffered by it in
good faith in accordance with such Written Instructions or in accordance with
the opinion of counsel for the Fund or for TAM. Written Instructions requested
by TAM will be provided by the Fund within a reasonable period of time.
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5.3 TAM, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing or
acting on behalf of the Fund only if said representative is an Authorized
Person. The Fund agrees that all Oral Instructions shall be followed within one
business day by confirming Written Instructions, and that the Fund's failure to
so confirm shall not impair in any respect TAM's right to rely on Oral
Instructions.
Article 6 COMPENSATION.
6.1 TAM will from time to time employ or associate with itself such
person or persons as TAM may believe to be particularly suited to assist it in
performing services under this Agreement. Such person or persons may be officers
and employees who are employed by both TAM and the Fund. The compensation of
such person or persons shall be paid by TAM and no obligation shall be incurred
on behalf of the Fund in such respect.
6.2 TAM shall not be required to pay any of the following expenses
incurred by the Fund: membership dues in the Investment Company Institute or any
similar organization; investment advisory expenses; costs of printing and
mailing stock certificates, prospectuses, reports and notices; interest on
borrowed money; brokerage commissions; stock exchange listing fees; taxes and
fees payable to Federal, state and other governmental agencies; fees of Board
Members of the Fund who are not affiliated with TAM; outside auditing expenses;
outside legal expenses; Blue Sky registration or filing fees; or other expenses
not specified in this Section 6.2 which are properly payable by the Fund. TAM
shall not be required to pay any Blue Sky registration or filing fees unless and
until it has received the amount of such fees from the Fund.
6.3 The Fund will compensate TAM for the performance of its obligations
hereunder in accordance with the fees and other charges set forth in the written
Fee Schedule annexed hereto as Schedule C and incorporated herein.
6.4 In addition to those fees set forth in Section 6.3 above, the Fund
agrees to pay, and will be billed separately for, out-of-pocket expenses
actually incurred by TAM in the performance of its duties hereunder.
Out-of-pocket expenses shall include, but shall not be limited to, the items
specified in the written schedule of out-of-pocket charges annexed hereto as
Schedule D and incorporated herein. Schedule D may be modified by written
agreement between the parties. Unspecified out-of-pocket expenses shall be
limited to those out-of-pocket expenses reasonably incurred by TAM in the
performance of its obligations hereunder.
6.5 The Fund agrees to pay all fees, charges and out-of-pocket expenses
to TAM by Federal Funds Wire within fifteen (15) business days following the
receipt of the respective invoice. In addition, with respect to all fees under
this Agreement, TAM may charge a service fee equal to the lesser of (i) one and
one half percent (1 1/2%) per month or (ii) the highest interest rate legally
permitted on any past due invoiced amounts, provided however, the foregoing
service fee shall not apply if the Fund in good faith legitimately disputes any
invoice amount in which case the Fund shall do the following within thirty (30)
days of the postmark date: (a) pay TAM the undisputed amount of the invoice; and
(b) provide TAM a detailed written description of the disputed amount and the
basis for the Administrator's dispute with such amount. In addition, the
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Fund shall cooperate with TAM in resolving disputed invoice amounts and then
promptly paying such amounts determined to be due.
6.6 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C a revised Fee Schedule executed and dated by the
parties hereto.
Article 7 [RESERVED]
Article 8 FUND ACCOUNTING SYSTEM.
8.1 TAM shall retain title to and ownership of any and all data bases,
computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by TAM in connection with the services
provided by TAM to the Fund herein (the "TAM System").
8.2 TAM hereby grants to the Fund a limited license to the TAM System
for the sole and limited purpose of having TAM provide the services contemplated
hereunder and nothing contained in this Agreement shall be construed or
interpreted otherwise and such license shall immediately terminate with the
termination of this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of the
Fund or any third party acting on behalf of the Fund is provided with direct
access to the TAM System, such direct access capability shall be limited to
direct entry to the TAM System by means of on-line mainframe terminal entry or
PC emulation of such mainframe terminal entry and any other non-conforming
method of transmission of information to the TAM System is strictly prohibited
without the prior written consent of TAM.
Article 9 REPRESENTATIONS AND WARRANTIES.
9.1 TAM represents and warrants to the Fund that:
(a) it is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement; and
(d) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
9.2 The Fund represents and warrants to TAM that:
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(a) it is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into this Agreement; and
(c) all corporate proceedings required have been taken to
authorize it to enter into this Agreement.
Article 10 INDEMNIFICATION.
10.1 The Fund shall indemnify and hold TAM harmless from and against
any and all claims, costs, expenses (including reasonable attorneys' fees),
losses, damages, charges, payments and liabilities of any sort or kind which may
be asserted against TAM or for which TAM may be held to be liable in connection
with this Agreement or TAM's performance hereunder (a "Claim"), unless such
Claim resulted from a negligent act or omission to act or bad faith by TAM in
the performance of its duties hereunder.
10.2 TAM shall indemnify and hold the Fund harmless from and against
any and all claims, costs, expenses (including reasonable attorneys' fees),
losses, damages, charges, payments and liabilities of any sort or kind which may
be asserted against the Fund or for which the Fund may be held to be liable in
connection with this Agreement (a "Claim"), provided that such Claim resulted
from a negligent act or omission to act, bad faith, willful misfeasance or
reckless disregard by TAM in the performance of its duties hereunder.
10.3 In any case in which one party (the "Indemnifying Party") may be
asked to indemnify or hold the other party (the "Indemnified Party") harmless,
the Indemnified Party will notify the Indemnifying Party promptly after
identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnified Party although the
failure to do so shall not prevent recovery by the Indemnified Party and shall
keep the Indemnifying Party advised with respect to all developments concerning
such situation. The Indemnifying Party shall have the option to defend the
Indemnified Party against any Claim which may be the subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the Claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Article 10 shall survive the termination of this
Agreement.
10.4 Any claim for indemnification under this Agreement must be
made prior to the earlier of:
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(a) one year after the Indemnified Party becomes aware of the
event for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
TAM's sole and exclusive remedy for claims or other actions or proceedings to
which the Fund's indemnification obligations pursuant to this Article 10 may
apply.
Article 11 STANDARD OF CARE.
11.1 TAM shall at all times act in good faith and agrees to use its
best efforts within commercially reasonable limits to ensure the accuracy of all
services performed under this Agreement, but assumes no responsibility for loss
or damage to the Fund unless said errors are caused by TAM's own negligence, bad
faith or willful misconduct or that of its employees.
11.2 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than three (3) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.3 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
11.4 Without in any way limiting the foregoing, in the event TAM shall
provide Blue Sky services to the Fund, TAM shall have no liability for failing
to file on a timely basis any material to be provided by the Fund or its
designee that it has not received on a timely basis from the Fund or its
designee, nor shall TAM have any responsibility to review the accuracy or
adequacy of materials it receives from the Fund or its designee for filing or
bear any liability arising out of the timely filing of such materials; nor shall
TAM have any liability for monetary damages for the sale of securities in
jurisdictions where Shares are not properly registered, or in jurisdictions
where Shares are sold in excess of the lawfully registered amount unless such
failure of proper registration or excess sales is due to the willful
misfeasance, bad faith or negligence of TAM and provided TAM has requested such
information from the Fund in a timely fashion.
Article 12 CONSEQUENTIAL DAMAGES.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES.
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As used in the preceding paragraph "incidental, indirect or
consequential damages" means damages which do not flow directly from the act of
the party or which arise from the intervention of special circumstances not
ordinarily predictable, and does NOT include direct damages which arise
naturally or ordinarily from a breach of contract.
Article 13 TERM AND TERMINATION.
13.1 This Agreement shall be effective on the date first written above
and shall continue for a period of three (3) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each,
unless the Fund or TAM provides written notice to the other of its intent not to
renew. Such notice must be received not less than ninety (90) days and not more
than one-hundred eighty (180) days prior to the expiration of the Initial Term
or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor Fund will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If the material failure is one for which the
Non-Defaulting Party has previously given the Defaulting Party notice as
provided in the previous sentence, the Agreement may be terminated by the
Non-Defaulting Party upon thirty (30) days written notice without giving the
Defaulting Party a second opportunity to cure such material failure. If TAM is
the Non-Defaulting Party, its termination of this Agreement shall not constitute
a waiver of any other rights or remedies of TAM with respect to services
performed prior to such termination of rights of TAM to be reimbursed for
out-of-pocket expenses. In all cases, termination by the Non-Defaulting Party
shall not constitute a waiver by the Non-Defaulting Party of any other rights it
might have under this Agreement or otherwise against the Defaulting Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary and except as provided in Section 13.4, should the Fund desire to move
any of the services provided by TAM hereunder to a successor service provider
prior to the expiration of the then current Initial or Renewal Term, or should
the Fund or any of its affiliates take any action which would result in TAM
ceasing to provide administration services to the Fund or the Fund prior to the
expiration of the Initial or any Renewal Term, TAM shall make a good faith
effort and use all commercially reasonable efforts to facilitate the conversion
on such prior date, however, there can be no guarantee that TAM will be able to
facilitate a conversion of services on such prior date. In connection with the
foregoing, should services be converted to a successor service provider or
should the Fund or any of its affiliates take any action which would result in
TAM ceasing to
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provide administration services to the Fund or the Fund prior to the expiration
of the Initial or any Renewal Term, the payment of fees to TAM as set forth
herein shall be accelerated to a date prior to the conversion or termination of
services and calculated as if the services had remained with TAM until the
expiration of the then current Initial or Renewal Term and calculated at the
asset and/or Shareholder account levels, as the case may be, on the date notice
of termination was given to TAM.
Article 14 ADDITIONAL PORTFOLIOS
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have TAM render services as sub-Fund under the terms hereof, the Fund
shall so notify TAM in writing, and if TAM agrees in writing to provide such
services, Schedule A shall be amended to include such additional Portfolios. If
after good faith negotiations, the parties are unable to agree upon the
conditions upon which TAM will service the new Portfolio, either party shall
have the right to terminate this Agreement upon sixty (60) days written notice
to the other party.
Article 15 CONFIDENTIALITY.
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and TAM shall exercise at least the same degree of care, but not less than
reasonable care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect its own confidential
information of a similar nature. The Fund and TAM shall not duplicate, sell or
disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. The Fund and TAM
may, however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and TAM may also disclose the Confidential
Information to independent contractors, auditors, and professional advisors,
provided they first agree in writing to be bound by the confidentiality
obligations substantially similar to this Section 15.1. Notwithstanding the
previous sentence, in no event shall either the Fund or TAM disclose the
Confidential Information to any competitor of the other without specific, prior
written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, portfolio holdings and internal performance
results relating to the past, present or future business activities of
the Fund or TAM, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
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(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or TAM a
competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this
Agreement or subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free
of any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to
receipt thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal remedies for maintaining
such information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of such
disclosure as practical so the other party may attempt to stop such disclosure
or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 16 FORCE MAJEURE; EXCUSED NON-PERFORMANCE.
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (provided that the
employees' demands are
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not reasonable and within the party's power to satisfy); or (v) nonperformance
by a third party or any similar cause beyond the reasonable control of such
party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In addition, no party shall be liable for
any default or delay in the performance of its obligations under this Agreement
if and to the extent that such default or delay is caused, directly or
indirectly, by the actions or inactions of the other party. In any such event,
the non-performing party shall be excused from any further performance and
observance of the obligations so affected only for as long as such circumstances
prevail and such party continues to use commercially reasonable efforts to
recommence performance or observance as soon as practicable.
Article 17 ASSIGNMENT AND SUBCONTRACTING.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that TAM
may, in its sole discretion, assign all its right, title and interest in this
Agreement to an affiliate, parent or subsidiary, or to the purchaser of
substantially all of its business. TAM may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement to
be performed by TAM but shall not be relieved of its obligations and
responsibilities hereunder by reason of such engagement.
Article 18 ARBITRATION.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in New York, New York in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 NOTICE.
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or TAM, shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
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To the Fund:
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: W. Xxxxx Xxxx, General Counsel
To TAM:
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx
Article 20 GOVERNING LAW/VENUE.
The laws of the State of New York, excluding the laws on conflicts of
laws, shall govern the interpretation, validity, and enforcement of this
agreement.
Article 21 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 CAPTIONS.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 PUBLICITY.
Neither TAM nor the Fund shall release or publish news releases, public
announcements, advertising or other publicity relating to this Agreement or to
the transactions contemplated by it without the prior review and written
approval of the other party; provided, however, that either party may make such
disclosures as are required by legal, accounting or regulatory requirements
after making reasonable efforts in the circumstances to consult in advance with
the other party.
Article 24 RELATIONSHIP OF PARTIES/NON-SOLICITATION.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
Article 25 ENTIRE AGREEMENT; SEVERABILITY.
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and
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understandings, whether written or oral, between the parties with respect to the
subject matter hereof. No change, termination, modification, or waiver of any
term or condition of the Agreement shall be valid unless in writing signed by
each party. No such writing shall be effective as against TAM unless said
writing is executed by an officer of TAM. A party's waiver of a breach of any
term or condition in the Agreement shall not be deemed a waiver of any
subsequent breach of the same or another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
THIRD AVENUE MANAGEMENT LLC
By: /s/ Xxxxx X. Xxxxx
-----------------------
Name: Xxxxx X. Xxxxx
Title: President
THIRD AVENUE VARIABLE SERIES TRUST
By: /s/ Xxxxx X. Xxxxx
-----------------------
Name: Xxxxx X. Xxxxx
Title: President
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SCHEDULE A
LIST OF PORTFOLIOS
Third Avenue Value Portfolio
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SCHEDULE B
DUTIES OF TAM
SERVICES RELATED TO ADMINISTRATION
BLUE SKY ADMINISTRATION
o Receiving daily sales figures.
o Receiving daily sales figures broken down by state from Xxxxxxx Xxxxxx
or other mutual fund marketplaces (if applicable).
o Produce daily warning report for sales in excess of pre-determined
percentage.
o Analyze all sales data to determine trends within any state.
o Produce and mail the following required filings:
o initial filings - produce all required forms including
notification of SEC effectiveness.
o renewals - produce all renewal documents and mail to states,
including follow-up to ensure all is in order to continue selling
in states.
o sales reports - produce all relevant sales reports for the states
and complete necessary documents to properly file sales reports
with states.
o prospectus filings - file all copies of definitive SAI and
prospectuses with the states which require notification.
o post-effective amendment filing - file all post-effective
amendments with the states which require notification, as well as
any other required documents.
o On demand additional states - complete filing for any states that the
Fund would like to add.
o Amendments to current permits - file in a timely manner any amendment
to registered share amounts.
o Update and file hard copy of all data pertaining to individual
permits.
PROCESSING AND PAYMENT OF BILLS
o Centralized contact to receive all invoices for Fund operating
expenses.
o Voucher invoices for authorization / money movement instructions
o Distribution of approved vouchers for payment / recording
o Monitoring bank statement for appropriate money movement and timing
o Ensure proper wire instructions for expenses paid by wire transfer
o Coordinate mailing of checks to various vendors
COMPLETION OF INDUSTRY QUESTIONNAIRES
o Preparation of monthly and quarterly questionnaires directly
associated with the operations of the Portfolios,
o Ensuring timely receipt by rating agencies of information for which
the Administrator is responsible.
o The Administrator will provide Prudential monthly download and file
transfer.
-16-
PREPARATION OF QUARTERLY REPORTS
o Preparation of Schedule of Investments for the Portfolios' fiscal
quarter ends.
o Coordination to receive market/Fund commentary from Funds' adviser.
o Centralized area to receive and implement comments and changes.
o Coordination and timing with printer.
o Review content of draft copies prior to printing.
PREPARATION OF SEMI-ANNUAL REPORTS AND ANNUAL REPORTS
o Preparation of Schedule of Investments, Statements of Assets and
Liabilities, Operations and Changes, Financial Highlights and
Footnotes to Financial Statements.
o Contact for auditors regarding questions / comments relating to the
Financial Statements / process.
o Timely delivery of properly formatted tape of registered shareholders
to ADP for quarterly report mailing.
o Centralized contact for receipt of president's letter, audit opinion
letter and letter of internal controls.
o Centralized area to receive and implement comments and changes.
o Coordination and timing with printer.
o Review content of draft copies prior to printing.
o Average Net Assets / Ratio Analysis.
MANAGEMENT REPORTING
o Daily, Schedule of Investment Report delivered electronically
o Daily, Market Capitalization Report for the Small-Cap Value Fund,
delivered electronically.
COMPLETION AND FILING OF N-SARS
o Preparation of N-SARs semi-annually.
o Preparation of Financial Data Sheet to facilitate XXXXX filing.
o Filing of N-SARs.
STATE AND LOCAL TAX INFORMATION
o Distribution notice to brokers.
o Calcuation of US Treasury / Agency percent of ordinary distribution.
o Massachusetts holding period / realized gains.
o South Carolina holding period / realized gains.
o Florida intangible tax.
o Preparation of 1099-DIV insert cards.
o Coordination with printer, mailroom for 1099-DIV insert cards.
o Review of 1099-DIV insert prior to printing.
o Calculation of Corporate Dividends Received Deduction percentage to
submit to audit firm for review.
-17-
REGULATORY COMPLIANCE
Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts
d. administration contracts
e. accounting contracts
f. custody administration contracts
g. transfer agent and stockholder services
2. Filings
a. N-1A (prospectus), post-effective amendment and supplements
("stickers")
b. 24f-2 indefinite registration of shares
c. filing fidelity bond under 17g-1
d. filing stockholder reports under 30b2-1
3. Annual updates of biographical information and questionnaires for
Trustees and Officers
CORPORATE BUSINESS AND STOCKHOLDER/PUBLIC INFORMATION
A. Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files
D. Release Corporate Information
1. To stockholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
-18-
b. tax information
c. changes to prospectus
d. letters from management
e. funds' performance
E. Communications to Stockholders
1. Coordinate printing and distribution of annual, semi-annual,
quarterly reports and prospectus
FINANCIAL AND MANAGEMENT REPORTING
A. Income and Expenses
1. Monitoring of expenses and expense accruals (monthly)
2. Checking Account Reconciliation (monthly)
3. Calculation of advisory fee and reimbursements to Fund (if
applicable)
4. Calculation of average net assets.
B. Distributions to Stockholders
1. Projections of distribution amounts
2. Calculations of dividends and capital gain distributions (in
conjunction with the Funds and their auditors)
a. compliance with income tax provisions
b. compliance with excise tax provisions
c. compliance with Investment Company Act of 1940
C. Financial Reporting
1. Liaison between fund management, independent auditors and
printers for stockholder reports
2. Preparation of financial statements for required SEC
post-effective filings (if applicable)
3. Portfolio turnover calculations
4. Calculation of Fund performance
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
E. Other Financial Analyses
1. Upon request from fund management, other budgeting and analyses
can be constructed to meet specific needs (additional fees may
apply)
2. Sales information, portfolio turnover (monthly)
3. Assist independent auditors on return of capital presentation,
excise tax calculation
4. Performance (total return) calculation (monthly)
5. IRS Form 1099 Miscellaneous preparation, mailing & IRS filing
-19-
6. Analysis of interest derived from various Government obligations
(annual) (if interest income was distributed in a calendar year)
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification entries to ensure proper
update
2. Perform various reviews to ensure accuracy of
subscription/liquidation schedules, Accounting (the monthly
expense analysis) and Custody (review of daily bank statements to
ensure accurate money movement).
3. Review accruals and expenditures where applicable
-20-
SCHEDULE C
FEE SCHEDULE
For the services to be rendered, the facilities to be furnished and the
payments to be made by TAM, as provided for in this Agreement, the Fund will pay
TAM on the first business day of each month a fee for the previous month at the
rates listed below.
FUND ADMINISTRATION
$170,000 per annum plus an amount equal to 50% of the difference between (i)(x)
$186,000 plus (y) an amount equal to .01% of the Fund's average net
assets in excess of $1 billion minus (ii) $170,000,
plus $65 per permit for Blue Sky services
MISCELLANEOUS CHARGES
The Fund shall be charged for the following products and services as applicable:
o Ad hoc reports
o Ad hoc SQL time
o Materials for Rule 15c-3 Presentations
o COLD Storage
o Digital Recording
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Pre-Printed Stock, including business forms, certificates, envelopes,
checks and stationary
FEE ADJUSTMENTS
After the one year anniversary of the effective date of this Agreement, TAM may
adjust the fees described in the above sections once per calendar year, upon
thirty (30) days prior written notice in an amount not to exceed the cumulative
percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U)
U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S.
Department of Labor since the last such adjustment in the Company's monthly fees
(or the Effective Date absent a prior such adjustment).
PROGRAMMING COSTS (TO THE EXTENT REQUESTED BY THE FUND)
The following programming rates are subject to an annual 5% increase after the
one year anniversary of the effective date of this Agreement.
-21-
(a) Dedicated Team: Programmer: $100,000 per annum
BSA: $ 85,000 per annum
Tester: $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team): $150.00 per/hr per
programmer
-22-
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse TAM monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
o Postage - direct pass through to the Fund
o Telephone and telecommunication costs, requested by the Fund,
including all lease, maintenance and line costs
o Shipping, Certified and Overnight mail and insurance
o Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
requested by the Fund
o Duplicating services
o Courier services
o Overtime, as approved by the Fund
o Temporary staff, as approved by the Fund
o Travel and entertainment, as approved by the Fund
o Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
o Third party audit reviews
o Vendor set-up charges for services
o XXXXX filing fees
o Vendor pricing comparison
o Such other expenses as are agreed to by TAM and the Fund
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with TAM. In addition, the Fund will
promptly reimburse TAM for any other unscheduled expenses incurred by TAM
whenever the Fund and TAM mutually agree that such expenses are not otherwise
properly borne by TAM as part of its duties and obligations under the Agreement.
-23-
