INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the 15th day of December, 2003, by and
between XXX XXXXX TRUST, a Massachusetts business trust, on behalf of its XXX
XXXXX FUND series (the "Fund"), and XXX XXXXX CAPITAL MANAGEMENT, INC. (the
"Advisor"), a North Carolina corporation registered as an investment advisor
under the Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to the Fund, and the Advisor is willing to so
furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints the Advisor to act as investment
advisor to the Fund for the period and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Trust has furnished the Advisor with copies
properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust, as filed with The Commonwealth of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's Bylaws (such Bylaws, as presently in effect and as they
shall from time to time be amended, are herein called the "Bylaws");
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Advisor and approving this Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940 Act and
under the Securities Act of 1933, as amended, relating to shares of
beneficial interest of the Fund (herein called the "Shares") as filed
with the Securities and Exchange Commission ("SEC") and all amendments
thereto; and
(e) The Fund's Prospectus and Statement of Additional Information (such
Prospectus and Statement of Additional Information, as presently in
effect and all amendments and supplements thereto are herein called
the "Prospectus").
The Trust will furnish the Advisor from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing at the same time as such documents are required to be filed with
the SEC.
3. MANAGEMENT. Subject to the supervision of the Trust's Board of Trustees,
the Advisor will provide a continuous investment program for the Fund,
including investment research and management with respect to all
securities, investments, cash and cash equivalents of the Fund. The Advisor
will determine from time to time what securities and other investments will
be purchased, retained or sold by the Fund. The Advisor will provide the
services under this Agreement in accordance with the Fund's investment
objectives, policies and restrictions as stated in its Prospectus. The
Advisor further agrees that it:
(a) Will conform its activities to all applicable rules and regulations of
the SEC and will, in addition, conduct its activities under this
Agreement in accordance with regulations of any other federal and
state agencies which may now or in the future have jurisdiction over
its activities under this Agreement;
(b) Will place orders pursuant to its investment determinations for the
Fund either directly with the issuer or with any broker or dealer. In
placing orders with brokers or dealers, the Advisor will attempt to
obtain the best net price and the most favorable execution of its
orders. Consistent with this obligation, the Advisor may consider the
financial responsibility, research and investment information and
other services provided by brokers. It is understood that research and
investment information provided by such brokers may be useful to the
Advisor in connection with its services to other clients;
(c) Will provide certain executive personnel for the Trust as may be
mutually agreed upon from time to time with the Board of Trustees, the
salaries and expenses of such personnel to be borne by the Advisor
unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities on
behalf of the Fund.
4. SERVICES NOT EXCLUSIVE. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free to
furnish similar services to others so long as its services under this
Agreement are not impaired thereby provided, however, that without the
written consent of
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the Trustees, the Advisor will not serve as investment advisor to any other
investment company having a similar investment objective to that of the
Fund.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Advisor hereby agrees that all records which it maintains
for the benefit of the Fund are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the
Trust's request. The Advisor further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by it pursuant to Rule 31a-1 under the 1940 Act that are not
maintained by others on behalf of the Fund.
6. EXPENSES. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory services
pertaining to the Fund. In the event that there is no distribution plan
under Rule 12b-1 of the 1940 Act in effect for the Fund, the Advisor will
pay the entire cost of the promotion and sale of Fund shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and costs of
the following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokeragefees and commissions with regard to portfolio transactions of
the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio securities;
(d) Fees and expenses of the Fund's administrator, transfer and dividend
disbursing agent and the Fund's fund accounting agent or, if the Trust
performs any such services without an agent, the costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Trust's existence as a legal entity;
(g) Compensation of Trustees who are not interested persons of the Advisor
as that term is defined by law;
(h) Costs of Trustees' and shareholders' meetings;
(i) Federal and state registration or qualification fees and expenses;
(j) Costs of setting in type, printing and mailing Prospectuses, reports
and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as provided in
paragraph 7 herein; and
(l) Distribution expenses, but only in accordance with a Plan of
Distribution as approved by the shareholders of the Fund in accordance
with Rule 12b-1 under the 1940 Act.
It is understood that the Trust may desire to register the Fund's shares
for sale in certain states which impose expense limitations on mutual
funds. The Trust
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agrees that it will register the Fund's shares in such states only with the
prior written consent of the Advisor.
7. COMPENSATION. The Trust will pay the Advisor and the Advisor will accept as
full compensation an investment advisory fee, based upon the average daily
net assets of the Fund, computed at the end of each month and payable
within five (5) business days thereafter, at the annual rate of nine tenths
of one percent (0.9%) of such assets.
8.(a)LIMITATION OF LIABILITY. The Advisor shall not be liable for any error of
judgment, mistake of law or for any other loss whatsoever suffered by the
Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Advisor in the performance of
its duties or from reckless disregard by it of its obligations and duties
under this Agreement.
(b) INDEMNIFICATION OF ADVISOR. Subject to the limitations set forth in this
Subsection 8(b), the Trust shall indemnify, defend and hold harmless (from
the assets of the Fund) the Advisor against all loss, damage and liability,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by the Advisor in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body,
related to or resulting from this Agreement or the performance of services
hereunder, except with respect to any matter as to which it has been
determined that the loss, damage or liability is a direct result of (i) a
breach of fiduciary duty with respect to the receipt of compensation for
services; or (ii) willful misfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from reckless
disregard by it of its duties under this Agreement (either and both of the
conduct described in clauses (i) and (ii) above being referred to
hereinafter as "Disabling Conduct"). A determination that the Advisor is
entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that
the Advisor was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Advisor for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the Advisor was not
liable by reason of Disabling Conduct by (a) vote of a majority of a quorum
of Trustees who are neither "interested persons" of the Trust as the quoted
phrase is defined in Section 2(a)(19) of the 1940 Act nor parties to the
action, suit or other proceeding on the same or similar grounds that is
then or has been pending or threatened (such quorum of such Trustees being
referred to hereinafter as the "Independent Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by the Advisor (but excluding
amounts paid in
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satisfaction of judgments, in compromise or as fines or penalties), may be
paid from time to time by the Fund in advance of the final disposition of
any such action, suit or proceeding; provided, that the Advisor shall have
undertaken to repay the amounts so paid if it is ultimately determined that
indemnification of such expenses is not authorized under this Subsection
8(b) and if (i) the Advisor shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of the Independent
Trustees, or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the Advisor
ultimately will be entitled to indemnification hereunder.
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any other
expenses shall be provided unless such indemnification shall be approved
(i) by a majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the Independent Trustees
pursuant to clause (i) shall not prevent the recovery from the Advisor of
any amount paid to the Advisor in accordance with either of such clauses as
indemnification if the Advisor is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable
belief that the Advisor's action was in or not opposed to the best
interests of the Fund or to have been liable to the Fund or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in its conduct under this
Agreement.
The right of indemnification provided by this Subsection 8(b) shall not be
exclusive of or affect any of the rights to which the Advisor may be
entitled. Nothing contained in this Subsection 8(b) shall affect any rights
to indemnification to which Trustees, officers or other personnel of the
Trust, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Fund hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for that
purpose.
(c) The provisions contained in Section 8 shall survive the expiration or other
termination of this Agreement, shall be deemed to include and protect the
Advisor and its directors, officers, employees and agents and shall inure
to the benefit of its/their respective successors, assigns and personal
representatives.
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9. DURATION AND TERMINATION. This Agreement shall become effective on the date
hereof and, unless sooner terminated as provided herein, shall continue in
effect for two years. Thereafter, this Agreement shall be renewable for
successive periods of one year each, provided such continuance is
specifically approved annually:
(a) By the vote of a majority of those members of the Board of Trustees
who are not parties to this Agreement or interested persons of any
such party (as that term is defined in the 1940 Act), cast in person
at a meeting called for the purpose of voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that term is
defined in the 0000 Xxx) of the outstanding voting securities of the
Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Trust or by the Advisor at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination of the Trust
must be authorized either by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund. This Agreement
will automatically terminate in the event of its assignment (as that term
is defined in the 1940 Act).
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by a written instrument
signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No material amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of
the Fund's outstanding voting securities (as defined in the 1940 Act).
11. MISCELLANEOUS. The captions in 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. If any provision
of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be
affected thereby. This Agreement shall be binding and shall insure to the
benefit of the parties hereto and their respective successors.
12. APPLICABLE LAW. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of North Carolina.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: XXX XXXXX TRUST
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxx, Xx.
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Title: Assistant Secretary Title: President
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ATTEST: XXX XXXXX CAPITAL MANAGEMENT, INC.
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxx, Xx.
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Title: Secretary Title: President
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