EXHIBIT 5.3
SUBADVISORY AGREEMENT
THIS SUBADVISORY AGREEMENT is entered into as of
the 1st day of February, 1998 between Frontegra Asset
Management, Inc. ("Adviser") and Northern Capital
Management Incorporated ("Subadviser").
W I T N E S S E T H
WHEREAS, Frontegra Funds, Inc., a Maryland
corporation (the "Corporation"), is registered with the
Securities and Exchange Commission (the "SEC") as an
open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, pursuant to an Investment Advisory
Agreement with Adviser (the "Advisory Agreement"), the
Corporation has retained Adviser to act as its
investment adviser;
WHEREAS, the Corporation is currently comprised of
three series: the Frontegra Total Return Bond Fund, the
Frontegra Opportunity Fund and the Frontegra Growth
Fund;
WHEREAS, the Advisory Agreement permits Adviser to
delegate certain of its duties to a subadviser, subject
to the requirements of the 1940 Act; and
WHEREAS, Adviser desires to retain Subadviser as
subadviser for the Frontegra Growth Fund (the "Fund").
NOW, THEREFORE, Adviser and Subadviser mutually
agree as follows:
1. Appointment as Subadviser. Adviser hereby
retains Subadviser to act as subadviser for the Fund,
subject to the supervision of Adviser and the Board of
Directors of the Corporation and subject to the terms
of this Agreement, and Subadviser agrees to accept such
employment.
2. Duties of Subadviser.
(a) Investments. Subject to the 1940 Act,
the direction of Adviser, the Board of Directors of the
Corporation and the investment policies and
restrictions of the Fund as set forth in the
Corporation's current registration statement on Form N-
1A, Subadviser is authorized and directed to purchase,
hold, sell and monitor on a continuous basis
investments for the account of the Fund (the
"Investments"). In providing these services,
Subadviser will conduct a continual program of
investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. Adviser will
provide Subadviser with reasonable assistance in
connection with Subadviser's activities under this
Agreement, including without limitation, information
concerning the Fund, its funds available for investment
and general affairs of the Corporation.
(b) Allocation of Brokerage. Subject to the
supervision of Adviser and the Board of Directors of
the Corporation, Subadviser is authorized and directed
to establish and maintain accounts on behalf of the
Fund, place orders for the purchase and sale of
Investments with or through, such persons, brokers or
dealers as Subadviser may elect, and negotiate
commissions to be paid on such transactions. In
selecting brokers or dealers and placing orders,
Subadviser will seek to obtain the most favorable
combination of price and execution available
(considering all factors it deems relevant, including
price, size of transaction, nature of the market for
the security, amount of commission, if any, timing,
reputation of broker or dealer and other factors),
except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research
services as provided below. The Subadviser may cause
the Fund to pay a broker that provides brokerage and
research services to the Subadviser a commission in
excess of the commission that another broker would have
charged for effecting that transaction provided (i) the
Subadviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage
and research services provided by the executing broker
in the terms of the particular transaction or in terms
of the Subadviser's overall responsibilities with
respect to the Fund and the other accounts as to which
the Subadviser exercises investment discretion, (ii)
such commission is paid in compliance with all
applicable state and federal laws, including Section
28(e) of the Securities Exchange Act of 1934, as
amended, and in accordance with this Agreement, and
(iii) in the opinion of the Subadviser, the total
commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long
term. To the extent not prohibited by applicable law,
if Subadviser deems the purchase or sale of a security
to be in the best interests of the Fund as well as
other clients of Subadviser, it may aggregate the
securities to be sold or purchased in order to obtain
the most favorable price or lower brokerage commissions
and efficient execution. In such event, allocation of
these securities and the expenses incurred in the
transaction will be made by Subadviser in the manner it
considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and its other
clients.
(c) Securities Transactions. Subadviser and
any of its affiliated persons will not purchase
securities or other instruments from or sell securities
or other instruments to the Fund; provided, however,
Subadviser may purchase securities or other instruments
from or sell securities or other instruments to the
Fund if such transaction is permissible under
applicable law or any exemptive regulatory order.
Subadviser will observe and comply with Rule 17j-l
under the 1940 Act. Upon request during any business
day, Subadviser immediately will make available to
Adviser or the Fund any reports concerning the Fund
required to be made by Subadviser pursuant to Rule 17j-
1 under the 1940 Act.
(d) Books and Records. Subadviser will
maintain all books and records required to be
maintained pursuant to the 1940 Act, including without
limitation, a daily ledger of such assets and
liabilities relating thereto and brokerage and other
records of all securities transactions, and will
furnish to Adviser in a timely manner all information
relating to Subadviser's services under this Agreement.
The Subadviser will also preserve such books and
records for the periods prescribed in Rule 31a-2 under
the 1940 Act. All books and records remain the sole
property of the Corporation and shall be immediately
surrendered to the Corporation upon request, provided
that Subadviser may retain a copy of the books and
records. Upon request during any business day, all
books and records maintained under this Agreement
immediately will be made available to the Corporation
or Adviser.
(e) Information Concerning Investments. As
Adviser or the Board of Directors of the Corporation
may reasonably request, Subadviser will furnish reports
on portfolio transactions and reports on Investments
held in the portfolio in such detail as the requesting
party may request. As mutually agreed upon, Subadviser
also will provide the Fund and Adviser periodic
economic and investment analyses and reports or other
investment services normally available to Subadviser's
other clients. Upon reasonable advance notice,
Subadviser will make its officers and employees
available to meet with Adviser and the Corporation's
Board of Directors at the Corporation's principal place
of business or another mutually agreed location to
review the Investments of the Fund. Subadviser will
inform the Corporation and Adviser of changes in
investment strategy, tactics or key personnel.
Subadviser also will provide information or perform
additional acts as are customarily performed by a
subadviser or which are required for the Fund or
Adviser to comply with their respective obligations
under applicable law, including without limitation the
Internal Revenue Code of 1986, the 1940 Act, the
Investment Advisers Act of 1940, as amended (the
"Advisers Act"), the Securities Act of 1933, as amended
(the "1933 Act"), and any state securities law, rule or
regulation.
(f) Custody Arrangements. Subadviser
acknowledges receipt of a Custody Agreement for the
Fund and, to the extent within its control, will comply
with the requirements of the Custody Agreement. On
each business day, Subadviser will provide the Fund's
custodian with information relating to all transactions
concerning the Fund's assets as Adviser or the
custodian requests.
(g) Voting of Proxies. Subadviser will have
the power to vote all securities in which it invests
Fund assets and shall not be required to seek or take
instruction from Adviser or the Fund with respect to
any such vote.
(h) Agent. Subject to any other written
instructions of Adviser, the Corporation or the Fund,
Subadviser is hereby appointed as Adviser's, the
Corporation's and the Fund's agent and attorney-in-fact
for the
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limited purpose of executing account
documentation, agreements, contracts and other
documents as Subadviser is requested by brokers,
dealers, counterparties and other persons in connection
with its management of the Investments; provided,
however, that any such documentation that the
Subadviser shall execute shall comply with all laws,
rules and regulations applicable to the business of the
Adviser and the Corporation, including but not limited
to the Advisers Act, the 1940 Act and the rules and
regulations thereunder. The Subadviser shall provide
the Adviser and the Corporation with copies of any
documents executed on behalf of the Adviser or the
Corporation hereunder as soon as possible after the
execution of any such documents.
(i) Compliance with Applicable Law and
Governing Documents. With respect to all matters
relating to its performance under this Agreement,
Subadviser and its directors, officers, partners,
employees and interested persons will act in accordance
with all applicable law. Subadviser will act in
accordance with the Corporation's governing instruments
and regulatory filings, including the Corporation's
Articles of Incorporation, By-Laws, currently effective
Registration Statement under the 1940 Act and the 1933
Act and Notice of Eligibility under Rule 4.5 of the
Commodity Exchange Act (the "CEA") (collectively,
"Governing Instruments and Regulatory Filings") and any
instructions or directions of the Corporation, its
Board of Directors or Adviser which whenever
practicable the Adviser or the Corporation shall
provide in writing. Adviser will provide Subadviser
with any amendments, supplements or other changes to
the Governing Instruments and Regulatory Filings as
soon as practicable after such materials become
available, and upon receipt Subadviser will act in
accordance with such amendments, supplements or other
changes.
(j) Corporation's Name; Adviser's Name.
Subadviser will have no rights relating to the
Corporation's name, the Fund's name or in the name
"Frontegra" as it is used in connection with investment
products, services or otherwise, and Subadviser will
make no use of such names without the express written
consent of the Corporation, the Fund or Adviser, as the
case may be; provided that notwithstanding anything in
this Agreement, Subadviser shall be entitled to use the
Fund's name and the name "Frontegra" in connection with
compiling and advertising its performance record and in
Form ADV or any other document required to be filed
with any governmental agency or self-regulatory
organization.
3. Services Exclusive. Except as consented to
by the Adviser in writing (which consent shall not be
unreasonably withheld), during the term of this
Agreement and for a period of one year thereafter,
Subadviser (and its successors) and any person or
entity controlled by Subadviser other than individual
employees, will not act as investment adviser or
subadviser or render investment advice to or sponsor,
promote or distribute any investment company or
comparable entity registered under the 1940 Act that is
in the same Lipper category as the Fund.
4. Duties of Adviser. Adviser will continue to
be responsible for all services to be provided to the
Fund pursuant to the Advisory Agreement, and shall
oversee and review Subadviser's performance under this
Agreement.
5. Independent Contractor. Subadviser will be
an independent contractor in performing its duties
under this Agreement and unless otherwise expressly
provided herein or otherwise authorized in writing,
will have no authority to act for or represent the
Corporation, the Fund or Adviser in any way or
otherwise be deemed an agent of the Corporation, the
Fund or Adviser.
6. Compensation. Adviser will pay Subadviser a
fee for its services (the "Subadvisory Fee") at the
annual rate of (i) 0.25 of 1% of the Fund's average
daily net assets prior to the first date when the
Fund's average daily net assets exceed $200 million and
(ii) 0.30 of 1% of the Fund's average daily net assets
on and after the first date when the Fund's average net
assets exceed $200 million. The Subadvisory Fee shall
be accrued each calendar day during the term of this
Agreement and the sum of the daily fee accruals shall
be paid monthly as soon as practicable following the
last day of each month. The daily fee accruals will be
computed by multiplying the fraction of 1/365 by the
annual rate and multiplying the product by the net
asset value of the Fund as determined in accordance
with the Corporation's registration statement as of the
close of business on the previous business day on which
the Fund was open for business, or in such other manner
as the parties agree. The Subadvisory Fee payable
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pursuant to this Section 6 shall not be reduced or
affected in any way by any advisory fee reduction or
waiver agreement, or any expense limitation
undertaking, entered into between Fund and Adviser.
7. Expenses. The Subadviser shall bear all
expenses incurred by it in connection with its services
under this Agreement other than the cost of securities,
commodities and other investments (including brokerage
commissions and other transaction charges, if any)
purchased by the Fund. In addition, the Subadviser
will, from time to time at its sole expense, employ
such persons as it believes to be particularly fitted
to assist it in the execution of its duties hereunder.
The Subadviser shall not be responsible for the Fund's
or the Adviser's expenses. Specifically, Subadviser
will not be responsible for expenses of the Fund or the
Adviser, including, but not limited to, the following:
(a) charges and expenses for determining the Fund's net
asset value and the maintenance of the Fund's books and
records and related overhead; (b) the charges and
expenses of the Fund's lawyers and auditors; (c) the
charges and expenses of any custodian, transfer agent,
plan agent, dividend disbursing agent and/or
administrator appointed by the Fund; (d) brokers'
commissions, and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to
which the Fund is a party; (e) insurance premiums,
interest charges, dues and fees for membership in trade
associations and all taxes and corporate fees payable
by the Fund to federal, state or other government
agencies; (f) fees and expenses required to be paid for
registration with the SEC, or any fees and expenses
required to be paid for the sale of Fund shares in any
state; (g) expenses related to shareholders' and
directors' meetings, and the preparation, printing and
distribution of prospectuses, proxy statements, reports
to shareholders and other Fund sales literature; (h)
distribution fees payable pursuant to rule 12b-1 under
the 1940 Act, if any; and (i) compensation payable to
the Fund's directors. The Fund or the Adviser shall
reimburse Subadviser for any such expenses or other
expenses of the Fund or the Adviser as may be
reasonably incurred by Subadviser on behalf of the Fund
or the Adviser. The Subadviser shall maintain and
provide to the Fund or the Adviser adequate records of
all such expenses.
8. Representations and Warranties of Subadviser.
Subadviser represents and warrants to Adviser, the
Corporation, and the Fund as follows:
(a) Subadviser is registered as an
investment adviser under the Advisers Act;
(b) Subadviser will not engage in any
futures transactions or options thereon on behalf of
the Fund prior to Subadviser filing a notice of
exemption pursuant to Rule 4.14 under the CEA with the
Commodity Futures Trading Commission (the "CFTC") and
the National Futures Association or becoming otherwise
qualified to act as a commodity trading advisor under
the CEA;
(c) Subadviser is a corporation duly
organized and validly existing under the laws of
Wisconsin with the power to carry on its business as it
is now being conducted;
(d) The execution, delivery and performance
by Subadviser of this Agreement are within its powers
and have been duly authorized by all necessary action
on the part of its members, and no action or filing
with any governmental body, agency or official is
required for the execution, delivery and performance of
this Agreement, and the execution, delivery and
performance by Subadviser of this Agreement do not
contravene or constitute a default under any provision
of applicable law, rule or regulation, Subadviser
governing instruments or any agreement, judgment,
injunction, order, decree or other instrument binding
upon Subadviser;
(e) This Agreement is a valid and binding
agreement of Subadviser;
(f) Subadviser has provided its current (and
will provide all amendments thereto) Form ADV to
Adviser, and each Form ADV provided to Adviser is and
will be a true and complete copy of the form filed with
the SEC and, to the best of Subadviser's knowledge and
belief, after consultation with counsel, the
information contained therein is accurate and complete
in all material respects and does not omit to state any
material fact necessary in order to make the statements
made, in light of the circumstances under which they
were made, not misleading; and
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(g) Subadviser has provided its Code of
Ethics to Adviser, and the Code of Ethics meets the
requirements of Rule 17j-1 under the 1940 Act. Within
45 days after the end of each calendar year during the
term of this Agreement, Subadviser will certify to
Adviser that it has complied with the requirements of
Rule 17j-l under the 1940 Act with regard to its duties
under this Agreement during the prior year and that
there has been no violation of its Code of Ethics
requiring significant remedial action with respect to
the Fund or in respect of any matter or circumstance
that is material to the performance of its duties or,
if such violation has occurred, that appropriate action
was taken in response to such violation.
9. Representations and Warranties of Adviser.
Adviser represents and warrants to Subadviser, as
follows:
(a) Adviser is registered as an investment
adviser under the Advisers Act;
(b) Adviser is a corporation duly organized
and validly existing under the laws of Illinois with
the power to carry on its business as it is now being
conducted;
(c) The execution, delivery and performance
by Adviser of this Agreement are within its powers and
have been duly authorized by all necessary action, and
Adviser has caused to be taken all necessary action
under the Advisory Agreement and the 1940 Act to
authorize the retention of Subadviser under this
Agreement, and no action or filing with any
governmental body, agency or official is required for
the execution, delivery and performance of this
Agreement;
(d) This Agreement is a valid and binding
agreement of Adviser and the Corporation on behalf of
the Fund; and
(e) Adviser has provided to Subadviser the
Corporation's current Registration Statement on Form N-
1A, and agrees to provide Subadviser with all
supplements or amendments thereto and to advise
Subadviser promptly in writing of any changes in the
Fund's investment policies or restrictions.
10. Survival of Representations and Warranties.
All representations and warranties made by Subadviser
pursuant to Section 8 will survive for the duration of
this Agreement, and Subadviser will immediately notify
Adviser and the Corporation in writing upon becoming
aware that any of the foregoing representations and
warranties are no longer true. In addition, Subadviser
will deliver to Adviser and the Fund copies of any
material amendments, supplements or updates to any of
the information provided to Adviser within 15 days
after becoming available.
11. Liability and Indemnification.
(a) Liability. In the absence of willful
misfeasance, bad faith, gross negligence, or reckless
disregard on the part of the Subadviser of its duties
or obligations under this Agreement, the Subadviser
shall not be subject to any liability for errors of
judgment, mistake of law or for any loss suffered by
the Adviser, the Corporation, the Fund, or its
shareholders in connection with matters to which this
Agreement relates. In the absence of willful
misfeasance, bad faith, gross negligence, or reckless
disregard on the part of the Adviser of its duties or
obligations under this Agreement, the Adviser shall not
be subject to any liability to the Subadviser, for any
act or omission in the course of, or in connection
with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale
of Investments; provided, however, that nothing herein
shall relieve the Adviser or the Subadviser from any of
their respective obligations under applicable law,
including without limitation, federal and state
securities laws and the CEA.
(b) Indemnification. The Subadviser shall
indemnify the Adviser and the Corporation, and their
respective officers, directors and "controlling
persons" (within the meaning of Section 2(a)(9) of the
1940 Act), for any liability and expenses, including
reasonable attorneys' fees, which may be sustained as a
result of the Subadviser's willful misfeasance, bad
faith, gross negligence, or reckless disregard of its
duties or obligations
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hereunder or any violations of
applicable law, including, without limitation, federal
and state securities laws and the CEA. The Adviser
shall indemnify the Subadviser and its officers,
directors, and "controlling persons" (within the
meaning of Section 2(a)(9) of the 0000 Xxx) for any
liability and expenses, including reasonable attorneys'
fees, which may be sustained as a result of the
Adviser's willful misfeasance, bad faith, gross
negligence, or reckless disregard of its duties and
obligations hereunder or any violations of applicable
law, including, without limitation, federal and state
securities laws and the CEA.
12. Duration and Termination.
(a) Duration. This Agreement shall begin
for the Fund as of the date of execution hereof and
shall continue in effect for two years from the date of
this Agreement and thereafter for successive periods of
one year, subject to the provisions for termination and
all of the other terms and conditions hereof if such
continuation shall be specifically approved at least
annually (i) by the vote of a majority of the Board of
Directors of the Corporation, including a majority of
the directors who are not parties to this Agreement or
"interested persons" of any such party (as defined in
the 1940 Act), cast in person at a meeting called for
that purpose or (ii) by the vote of a majority of the
outstanding voting securities (as that phrase is
defined in Section 2(a)(42) of the 0000 Xxx) of the
Fund.
(b) Termination. Notwithstanding anything
to the contrary provided herein, this Agreement may be
terminated at any time, without payment of any penalty:
(i) by the vote of a majority of the Board of Directors
of the Corporation, by the vote of a majority of the
outstanding voting securities of the Fund or by
Adviser, in each case upon 60 days' written notice; or
(ii) by Subadviser upon 120 days written notice to
Adviser, the Corporation, and the Fund. This Agreement
shall also terminate automatically in the event of its
assignment (as defined in Section 2(a)(4) of the 0000
Xxx) or upon the termination of the Advisory Agreement.
13. Amendment. This Agreement may be amended by
the mutual consent of the parties, provided that the
terms of each such amendment shall be approved by (i)
the affirmative vote of a majority of the Board of
Directors of the Corporation cast in person at a
meeting called for that purpose, including a majority
of directors who are not "interested persons" of the
Fund or the Adviser, and (ii) if necessary, by a vote
of a majority of the outstanding voting securities of
the Fund. If such amendment is proposed in order to
comply with the requirements of the SEC, state
regulatory bodies or other governmental authorities, or
to expressly obtain any advantage for Adviser and
Subadviser under federal or state laws, Adviser will
notify Subadviser of the form of amendment which it
deems necessary or advisable and the reasons therefor,
and if Subadviser declines to assent to such amendment,
the Adviser may terminate this Agreement forthwith.
14. Confidentiality. Subject to the duties of
the Subadviser to comply with applicable laws,
including any demand of any regulatory or taxing
authority having jurisdiction or under compulsory
process of law, the Subadviser shall, during the term
of this Agreement and for a period of 5 years
thereafter, treat as confidential all non-public
information pertaining to the Fund and the actions of
the Subadviser, the Adviser and the Corporation in
respect thereof. Information disclosed in voluntary
and required reports to shareholders of the Corporation
and to regulatory authorities is deemed to be public
information.
15. Notice. Any notice that is required to be
given by the parties to each other under the terms of
this Agreement shall be in writing, delivered or mailed
postpaid to the other party, or transmitted by
facsimile with acknowledgment of receipt, to the
parties at their principal places of business, which
may from time to time be changed by the parties by
notice to the other party.
16. Governing Law. This Agreement is governed by
and construed in accordance with the laws of the United
States and the internal laws of the State of Illinois;
provided, however, that nothing herein shall be
construed in a manner that is inconsistent with the
1940 Act, the Advisers Act or the rules and regulations
promulgated with respect to such respective Acts.
17. Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall
together constitute one and the same instrument.
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18. Third-Party Rights. In addition to the
parties hereto, this Agreement is intended to be for
the benefit of the Corporation, which is intended to be
a third-party beneficiary hereunder and may, as such,
exercise such rights as if it were the Adviser. With
the exception of such parties, no other party shall
have any rights hereunder.
19. Severability. If any provision of this
Agreement is held or made invalid by a court decision
or applicable law, the remainder of the Agreement shall
not be affected adversely and shall remain in full
force and effect.
20. Miscellaneous. Any question of
interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the
1940 Act and to interpretations thereof. Specifically,
as used in this Agreement, "investment company,"
"affiliated person," "interested person," "assignment,"
"broker," "dealer" and affirmative "vote of the
majority of the Fund's outstanding voting securities"
shall all have such meaning as such terms have in the
1940 Act. The term "investment adviser" shall have
such meaning as such term has in the Advisers Act or
the 1940 Act, as the case may be. In addition, where
the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is relaxed by a
rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule,
regulation or order.
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IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the day and year first
written above.
FRONTEGRA ASSET MANAGEMENT, INC.
on behalf of Frontegra Growth Fund
By: /s/ Xxxxxxx X. Xxxxxxx III
Its: Co-President
Attest: /s/ Xxxxxx X. Xxxxxxxx
NORTHERN CAPITAL MANAGEMENT INCORPORATED
By: /s/ Xxxxxx X. Xxxxxx
Its: President
Attest: /s/ Xxxxx Xxxxxxx
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