1
Exhibit 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this ____ day of February, 1998 between the ICM
Series Trust, an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts (hereinafter called the "Trust"), and IronWood
Capital Management, LLC, a Delaware limited liability company, (hereinafter
called the "Adviser");
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and is authorized to issue shares ("Shares") in separate series and classes; and
WHEREAS, a series of the Trust having Institutional Class Shares and
Investment Class Shares, as well as separate assets and liabilities, has been
created under the name ICM/Isabelle Small-Cap Value Fund (the "Fund"); and
WHEREAS, the Adviser is registered as an Adviser under the Advisers
Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Trust desires to retain the Adviser to render advisory
services to the Fund in the manner and on the terms and conditions hereinafter
set forth; and
WHEREAS, the Adviser is willing to perform such services on said terms
and conditions;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which is thereby acknowledged, it is hereby agreed between the
Trust and the Adviser, as follows:
1. The Trust hereby retains the Adviser, and the Adviser hereby
agrees, to act as investment adviser to the Trust and, subject to such
limitations as the Board of Trustees of the Trust may impose, to assume all
investment duties and have full discretionary power and authority with respect
to investment of the assets of the Fund. Without limiting the generality of the
foregoing, the Adviser shall (i) obtain and evaluate such information and advice
relating to the economy and securities markets and securities as it deems
necessary or useful to discharge its duties hereunder; (ii) continuously invest
the assets of the Fund in a manner consistent with the investment objective and
policies thereof as stated in the Fund's Prospectuses and Statements of
Additional Information
1
2
on file with the Securities and Exchange Commission, as the same may be amended
from time to time; (iii) determine the securities to be purchased, sold or
otherwise disposed of by the Fund and the timing of such purchases, sales and
dispositions; (iv) vote all proxies for securities held by the Fund and exercise
all other voting rights with respect to such securities in the manner it deems
appropriate; (v) issue settlement instructions to custodians designated by the
Trust; (vi) evaluate the credit worthiness of securities dealers, banks and
other entities with which the Fund may engage in repurchase agreements and
monitor the status of such agreements; and (vi) take such further action,
including the placing of purchase and sale orders and the selection of
broker-dealers to execute such orders on behalf of the Fund, as the Adviser
shall deem necessary or appropriate, in its sole discretion, to carry out its
duties under this Agreement The Adviser shall also furnish to or place at the
disposal of the Trust such information, evaluations, analyses and opinions
formulated or obtained by the Adviser in the discharge of its duties, as the
Trust may, from time to time, reasonably request.
The Adviser agrees, that in performing its duties hereunder, it will
comply with (i) the 1940 Act and the Advisers Act, and all rules and regulations
promulgated thereunder; (ii) all other applicable federal and state laws and
regulations, (iii) the provisions of the Declaration of Trust and By-Laws of the
Trust, as amended from time to time; and (iv) any applicable procedures adopted
by the Trust or the Adviser.
2. Adviser is responsible for broker-dealer selection in its sole
discretion, and is not obligated to deal with any broker or group of brokers in
executing portfolio transactions for the Fund. In selecting broker-dealers,
Adviser will generally seek the best combination of net price and execution and
may consider other factors, including: the broker's trading expertise, stature
in the industry, execution ability, facilities, clearing capabilities and
financial services offered, long-term relations with Adviser, reliability and
financial responsibility, timing and size of order and execution, difficulty of
execution, current market conditions and depth of the market. Transaction
charges, being a component of price, may also be considered as a factor in
making such determination. Accordingly, the price to the Fund in any transaction
may be less favorable than that available from another broker-dealer if the
difference is reasonably justified by other aspects of the portfolio execution
services offered. Subject to such policies as the Board of Trustees of the Trust
may determine, the Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Fund to pay a broker or dealer that provides brokerage
or research services to the Adviser an amount of commission for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker and dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Trust. The Adviser is
further authorized to allocate the orders placed by it on behalf of the Fund to
such brokers or dealers who also provide research or statistical material, or
other services, to the Trust, the Adviser, or any
2
3
affiliate of either. Such allocation shall be in such amounts and proportions as
the Adviser shall determine, and the Adviser shall report on such allocations
regularly to the Trust, indicating the broker-dealers to whom such allocations
have been made and the basis therefor. The Adviser is also authorized to
consider sales of shares as a factor in the selection of brokers or dealers to
execute portfolio transactions, subject to the requirements of best execution,
i.e., that such brokers or dealers are able to execute the order promptly and at
the best obtainable securities price.
3. The Adviser agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be maintained
by the Adviser with respect to the Funds by the 1940 Act. The Adviser further
agrees that all records which it maintains for the Funds are the property of the
Funds and it will promptly surrender any of such records upon request.
4. The Adviser shall bear the cost of rendering the advisory services
to be performed by it under this Agreement, and shall, at its own expense, pay
the compensation of any Trustees, officers and employees, if any, of the Trust
who are affiliated persons of the Adviser. All other operating costs and
expenses relating the Fund shall be paid by the Trust from the assets of the
Fund, including without limitation: (i) the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the safekeeping
of its cash, portfolio securities and other property, and any stock transfer or
dividend agent or agents appointed by the Fund; (ii) brokers' commissions
chargeable to the Fund in connection with portfolio transactions to which the
Fund is a party; (iii) all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies;(iv) the cost and expense of engraving or printing of certificates
representing shares of the Fund; (v) all costs and expenses in connection with
the registration and maintenance of registration of the Fund and its shares with
the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of counsel
and the costs and expenses of preparation, printing (including typesetting) and
distributing prospectuses for such purposes);(vi) all expenses of shareholders'
and Trustees' meetings and of preparing, printing and mailing proxy statements
and reports to shareholders; fees and travel expenses of Trustees or members of
any Advisory board or committee who are not employees of the Adviser; (vii) all
expenses which the Trust or the Fund agrees to bear pursuant to any plan adopted
by the Trust and/or the Fund pursuant to Rule 12b-1 of the 1940 Act or any other
dividend or distribution program or agreement; (viii) charges and expenses of
any outside service used for pricing of the Fund's shares; (ix) charges and
expenses of legal counsel, including counsel to the Trustees of the Trust who
are not interested persons (as defined in the 0000 Xxx) of the Fund or the
Adviser, and of independent accountants, in connection with any matter relating
to the Fund; (x) membership dues of industry associations; (xi) fees and
expenses incident to the listing of the Fund's shares on any stock exchange;
(xii) interest payable on Fund borrowings; (xiii) postage; insurance premiums on
property or personnel (including officers and Trustees) of the Fund which inure
to its benefit; (xiv) extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and xv) all other charges and costs of the Fund's operation
unless otherwise explicitly provided herein.
3
4
Notwithstanding anything in the immediately preceding paragraph to the
contrary the Adviser hereby undertakes to limit total Fund expenses, including
the investment advisory fee set forth in Paragraph 6 below, to 1.95% of the
average daily net assets annually for Investment Class Shares and 1.70% of the
average daily net assets annually for Institutional Class Shares.
5. For the services to be rendered by the Adviser to the Fund, the
Trust shall pay to the Adviser monthly compensation, calculated from the day of
commencement of operations of the Fund, determined by applying the annual rate
of one percent (1%) of the Fund's average daily net assets. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily and paid monthly. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above.
In the event the expenses of the Fund (including the fees of the
Adviser and amortization of organization expenses, but excluding interest,
taxes, brokerage commissions, extraordinary expenses and sales charges, and
expenses attributable to investing outside the United States) for any fiscal
year exceed the limits set by applicable regulations of state securities
commissions where the Fund is registered or qualified for sale, the Adviser will
reduce its fees by the amount of such excess. Any such reductions are subject to
readjustment during the year. The payment of the advisory fee at the end of any
month will be reduced or postponed or, if necessary, a refund will be made to
the Fund so that at no time will there be any accrued but unpaid liability under
this expense limitation. The adviser may reduce any portion of the compensation
or reimbursement of expenses due to it under this agreement, or may agree to
make payments to limit the expenses which are the responsibility of the Fund.
Any such reduction or payment shall be applicable only to such specific
reduction or payment shall be applicable only to such specific reduction or
payment and shall not constitute an agreement to reduce any future compensation
or reimbursement due to the Adviser hereunder or to continue future payments.
Any fee withheld from the Adviser under this paragraph shall be reimbursed by
the Fund to the Adviser to the extent permitted by the applicable state law if
the aggregate expenses for the next succeeding fiscal year do not exceed the
applicable state limitation or any more restrictive limitation to which the
Adviser has agreed.
6. The Adviser will use its best judgment and effort in its investment
of the Fund's assets, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties hereunder,
the Adviser shall not be liable to the Trust, the Fund or any of its
shareholders for any error of judgment or mistake of law or for any act or
omission by the Adviser or for any losses sustained by any of them. The Adviser
shall be indemnified by the Trust as an agent of the Trust in accordance with
the terms of Section 4.8 of the Trust's By-Laws. As used in this Section 7, the
term "Adviser" shall include any officers, managers, employees, or other
affiliates of the Adviser performing services with respect to the Fund.
4
5
7. Nothing contained in this Agreement shall prevent the Adviser or
any affiliated person of the Adviser (as defined in the 0000 Xxx) from acting as
investment adviser or manager for any other investment companies and other
clients, whether or not the investment objectives or policies of any such other
clients are similar to those of the Fund, and shall not in any way bind or
restrict the Adviser or any such affiliated person from buying, selling or
trading any securities for their own accounts or for the account of others for
whom the Adviser or any such affiliated person may be acting. Nothing in this
Agreement shall limit or restrict the right of the Adviser or any manager,
officer or employee of the Adviser to engage in any other business or to devote
time and attention in part to the management or other aspects of any other
business whether of a similar or dissimilar nature, so long as Advisers services
hereunder are not impaired thereby.
8. This Agreement shall become effective on the date hereof and shall
continue in effect, unless sooner terminated as herein provided, for two (2)
years from such date, and from year to year thereafter provided such continuance
is approved at least annually by the vote of a majority of the Board of Trustees
of the Trust, including a majority of the Trustees of the Trust who are not
parties to this Agreement or "interested persons" (as defined in the 0000 Xxx)
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 may, at
any time and without the payment of any penalty, terminate this Agreement upon
sixty (60) days' written notice to the Adviser, either by majority vote of the
Trustees of the Trustee or by the vote of a majority of the outstanding voting
securities of the Fund; (b) this Agreement shall immediately terminate in the
event of its assignment (to the extent required by the 1940 Act and the rules
thereunder) unless such automatic terminations shall be prevented by an
exemptive order of the Securities and Exchange Commission; and (c) the Adviser
may terminate this Agreement without payment of penalty on sixty (60) days
written notice to the Trust.
9. Any notice to be given by the Adviser to the Trust under this
Agreement shall be given in writing, addressed and hand delivered or mailed
certified mail, to 0000 Xxxxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000, or
such other address as shall be specified in writing to the Adviser. Any notice
to be given by the Trust or the Fund to the Adviser under this Agreement shall
be given in writing, addressed and delivered or mailed certified mail, to Xxx
Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxxxxx 00000, or such other address
as shall be specified in writing to the Trust.
10. No provision of this Agreement may be changed, waived, discharge
or terminated orally, but only by any instrument in writing signed by both
parties hereto, and no amendment of this Agreement shall be effective with
respect to the Fund until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of the Fund, and (ii) a majority of the
Trustees of the Trust, including a majority of Trustees who are not interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval, if such approval is required by
applicable law. Notwithstanding anything herein to the contrary, this Agreement
may be amended by the parties without the vote or consent of the shareholders of
the
5
6
Fund to supply any omission, to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, or if they deem it necessary to
conform this Agreement to the requirements of applicable federal laws or
regulations, but neither the Fund nor the Adviser shall be liable for failing to
do so.
11. It is understood that the name "IronWood Capital Management" or
any derivative thereof or logo associated with that name, including without
limitation "ICM" or "IronWood", is the valuable property of the Adviser and its
affiliates, and that the Fund has the right to use such name (or derivative
thereof or associated logo) only so long as this Agreement shall continue with
respect to the Fund. Upon termination of this Agreement, the Fund shall
forthwith cease to use such name (or derivative thereof or associated logo) and
the Trust shall promptly amend its Declaration of Trust to change its name and
the name of the Fund to comply herewith.
12. This Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts. To the extent the applicable law of the
Commonwealth of Massachusetts, or any of the provisions herein, conflict with
the applicable provisions of the 1940 Act, the Advisers Act or any rules,
regulations or orders of the Securities and Exchange Commission, the latter
shall control.
13. The Adviser understands that the obligations of this Agreement are
not binding upon any shareholder of the Trust personally, but bind only the
Trust's property; the Adviser acknowledges that it has notice of the provisions
of the Trust's Declaration of Trust disclaiming shareholder liability for acts
or obligations of the Trust or any series of the Trust, including, without
limitation, the Fund. This Agreement has been executed by or with reference to
any Trustee in such person's capacity as a Trustee, and the Trustees shall not
be personally liable hereon.
(Signatures on Following Page)
6
7
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written in Boston, Massachusetts.
THE ICM SERIES TRUST
By:_____________________________
Attest:
-------------------------
IRONWOOD CAPITAL MANAGEMENT, LLC
By:_____________________________
Attest:
-------------------------
7
