INVESTMENT ADVISORY AGREEMENT
THIS
AGREEMENT
made and
entered into on this 1st
day of
May,
1998,
by and between XXXXXXX
MICROCAP OPPORTUNITIES FUND, INC.,
a
Maryland corporation (hereinafter sometimes referred to as the “Fund”), and
XXXXXXX
CAPITAL MANAGEMENT, INC.,
an
Illinois corporation (hereinafter sometimes called the “Adviser”);
W I T N E S S E T H
:
WHEREAS,
the Fund
is registered with the Securities and Exchange Commission as an open-end
management investment company under the Investment Company Act of 1940 (the
“Act”); and
WHEREAS,
the Fund
desires to retain Adviser, which is a registered Investment Adviser under the
Investment Advisers Act of 1940, to act as investment adviser for and to manage
its assets;
NOW,
THEREFORE,
in
consideration of the foregoing and the terms, conditions and covenants contained
herein, the Fund and Adviser do mutually promise and agree as
follows:
1. Employment.
The
Fund hereby employs Adviser to act as investment adviser for and to manage
the
investment and reinvestment of the assets of the Fund subject to the supervision
of the Board of Directors of the Fund and subject to the terms of this
Agreement. The Adviser shall, at its expense, provide for the use of the
Fund,
office space and all necessary office facilities, equipment and personnel
for
servicing the investments of the Fund and maintaining its organization, shall
pay the salaries and fees of all officers of the Fund and of directors of
the
Fund who are “interested persons” of the Adviser as such term is defined under
the Act, and shall pay for all clerical services relating to research,
statistical and investment work.
2. Allocation
of Portfolio Brokerage.
The
Adviser is authorized, subject to the supervision of the Board of Directors
of
the Fund, to place orders for the purchase and sale of the Fund’s portfolio
securities and to negotiate commissions to be paid on such transactions.
The
Adviser may, on behalf of the Fund, pay brokerage commissions to a broker
which
provides brokerage and research services to the Adviser in excess of the
amount
another broker would have charged for effecting the transaction, provided
(i) the Adviser determines in good faith that the amount is reasonable in
relation to the value of the brokerage and research services provided by
the
executing broker in terms of the particular transaction or in terms of
the
Adviser’s overall responsibilities with respect to the Fund and the accounts as
to which the Adviser exercises investment discretion, (ii) such payment is
made in compliance with Section 28(e) of the Securities Exchange Act of
1934 and other applicable state and federal laws, and (iii) in the opinion
of the Adviser, the total commissions paid by the Fund will be reasonable
in
relation to the benefits to the Fund over the long
term.
3. Expenses
Borne by Fund.
The
Fund will pay all its expenses other than those expressly stated to be payable
by the Adviser hereunder, which expenses payable by the Fund shall include,
without limitation, interest charges, taxes, brokerage commissions and similar
expenses, expenses of issue, sale, repurchase or redemption of shares, expense
of registering or qualifying shares for sale, expenses of printing and
distributing prospectuses to existing shareholders, charges of custodians
(including sums as custodian and for keeping books and similar services to
the
Fund), transfer agents (including the printing and mailing of reports and
notices to shareholders), registrars, auditing and legal services, clerical
services related to recordkeeping and shareholder relations, printing of
stock
certificates, fees for directors who are not “interested persons” of Adviser,
and other expenses not expressly assumed by Adviser under Paragraph 1 above,
provided, that in the event the expenses and charges payable by the Fund,
except
interest charges, taxes, brokerage commissions and similar fees, in any given
fiscal year exceed that percentage of the average net asset value of the
Fund
for such year, as determined by valuations made as of the close of each business
day of such year, which is the most restrictive percentage expense limitation
provided by the state laws of the various states in which Fund shares are
qualified for sale, or if the states in which the Fund’s common stock is
qualified for sale impose no restrictions, then 1.75%. Adviser shall reimburse
the Fund for such excess. Reimbursement of expenses by Adviser shall be made
on
a monthly basis and will be paid to the Fund by a reduction in the Adviser’s
fee, subject to later adjustment month by month for the remainder of the
Fund’s
fiscal year.
4. Authority
of Adviser.
The
Adviser shall for all purposes herein be considered an independent contractor
and shall not, unless expressly authorized and empowered by the Fund, have
authority to act for or represent the Fund in any way, form or manner. Any
authority granted by the Fund to the Adviser shall be in the form of a
resolution or resolutions adopted by the Board of Directors of the
Fund.
5.
Compensation
of Adviser.
For the
services to be furnished during any month by the Adviser hereunder, the Fund
shall pay the Adviser as a basic advisory fee as soon as practical after the
last day of such month an amount equal to 1/12th of 1% (.0833%) of the average
of the net asset value of the Fund determined as of the close of business on
each business day throughout the month (hereinafter called “average asset
value”).
In
case
of termination of this Agreement during any month, the fee for that month shall
be reduced proportionately on the basis of the number of calendar days during
which it is in effect and the fee computed upon the average asset value of
the
business days during which it is so in effect.
6. Rights
and Powers of Adviser.
Adviser’s rights and powers with respect to acting for and on behalf of the
Fund, including the rights and powers of Adviser’s officers and directors, shall
be as follows:
(a)
Directors,
officers, agents and shareholders of the Fund are or may at any time or times
be
interested in the Adviser as officers, directors, agents, shareholders or
otherwise. Correspondingly, directors, officers, agents and shareholders of
the
Adviser are or may at any time or times be interested in the Fund as directors,
officers, agents and as shareholders or otherwise, but nothing herein shall
be
deemed to require the Fund to take any action contrary to its Articles of
Incorporation or any applicable statute or regulation. The Adviser shall, if
it
so elects, also have the right to be a shareholder in the Fund.
-2-
(b) Except
for an initial investment in Fund shares not in excess of $100,000, the Adviser
shall not take any long or short positions in the stock of the Fund and that
insofar as it can control the situation it shall prevent any and all of its
officers, directors, agents or shareholders from taking any long or short
position in the stock of the Fund. This prohibition shall not in any way be
considered to prevent the Adviser or any officer, director, agent or shareholder
of the Adviser from purchasing and owning stock of the Fund for investment
purposes. The Adviser shall notify the Fund of any sales of shares of the Fund
made by the Adviser within two months after purchase by the Adviser of shares
of
the Fund.
(c) The
services of the Adviser to the Fund are not to be deemed exclusive and Adviser
shall be free to render similar services to others as long as its services
for
others does not in any way hinder, preclude or prevent the Adviser from
performing its duties and obligations under this Agreement. In the absence
of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Adviser, the Adviser shall
not be subject to liability to the Fund or to any shareholder of the Fund for
any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding
or
sale of any security.
7. Termination
of Agreement.
The
following shall apply with respect to the termination of this
Agreement.
(a) This
Agreement shall continue in effect for two (2) years from the date hereof and
indefinitely thereafter, but only so long as the continuance after such two
(2)
year period is specifically approved each year by the Board of Directors of
the
Fund or by the affirmative vote of a majority of the Fund’s outstanding voting
securities, as defined in the Act. In addition to the foregoing, each renewal
of
this Agreement must be approved by the vote of a majority of the Fund’s
directors who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such
approval. Prior to voting on the renewal of this Agreement, the Board of
Directors of the Fund shall request and evaluate, and the Adviser shall furnish,
such information as may reasonably be necessary to enable the Fund’s Board of
Directors to evaluate the terms of this Agreement.
(b) Notwithstanding
whatever may be provided herein to the contrary, this Agreement may be
terminated at any time, without payment of any penalty, by vote of a majority
of
the Board of Directors of the Fund, or by vote of a majority of the outstanding
voting securities of the Fund, or by the Adviser, in each case, upon sixty
(60)
days’ written notice to the other party and shall terminate automatically in the
event of its assignment.
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8.
Amendment.
This
Agreement may be amended by mutual consent of the parties, provided that the
terms of each such amendment shall be approved by the Board of Directors or
by a
vote of a majority of the then outstanding voting securities of the Fund. If
such amendment is proposed in order to comply with the recommendations or
requirements of the Securities and Exchange Commission or state regulatory
bodies or other governmental authority, or to obtain any advantage under state
or federal laws, the Fund shall notify the Adviser of the form of amendment
which it deems necessary or advisable and the reasons therefor, and if the
Adviser declines to assent to such amendment, the Fund may terminate this
Agreement forthwith.
9. 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, addressed and delivered, or mailed
postpaid to the other party at the principal place of business of such
party.
10. Assignment.
This
Agreement shall neither be assignable nor subject to pledge or hypothecation
and
in the event of assignment, pledge or hypothecation shall automatically
terminate. For purposes of determining whether an “assignment” has occurred, the
definition of “assignment” in Section 2(a)(4) of the Act shall
control.
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement on the day and year first above
written.
| XXXXXXX MICROCAP OPPORTUNITIES FUND, INC. | ||
| By: /s/ Xxxxxx X. Xxxxxxx | ||
| President | ||
| [CORPORATE SEAL] | ||
| Attest: /s/ Xxxxxxx Xxxxxx | ||
| Secretary | ||
| XXXXXXX CAPITAL MANAGEMENT, INC. | ||
| By /s/ Xxxxxx X. Xxxxxxx | ||
| President | ||
| [CORPORATE SEAL] | ||
| Attest /s/ Xxxxxxx Xxxxxx | ||
| Secretary |
