EXHIBIT 10(a)
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FORM OF
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT ("Agreement") made this ____ day of
____________________. 2004, between Integrity Certificate Company, a Maryland
corporation (the "Company"), and Integrity Money Management, Inc., a North
Dakota corporation (the "Adviser") (collectively, the "Parties").
WHEREAS, the Company is organized and intends to operate as a face-amount
certificate investment company and is so registered under the Investment Company
Act of 1940, as amended, (the "Act"); and
WHEREAS, the Company has registered, or will register, certain face-amount
certificates ("Certificates") under the Securities Act of 1933, as amended,
("1933 Act"), to the extent required thereby; and
WHEREAS, the Company has issued or will issue shares of capital stock in
accordance with the Act; and
WHEREAS, the assets of the Company will be used to support the Company's
obligations under the Certificates to the extent required by the Act; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and is engaged principally in the business of
rendering investment advisory services; and
WHEREAS, the Company desires to have the Adviser perform the investment
advisory services described herein, and the Adviser desires to provide these
services to the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration the receipt of which is hereby
acknowledged, the Parties agree as follows:
1. APPOINTMENT OF THE ADVISER.
(a) The Company hereby appoints the Adviser, and the Adviser hereby
accepts such appointment, to act as the investment adviser to the Company
for the period and on the terms herein set forth, for the compensation
provided on Schedule A hereto.
(b) The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to act for or
represent the Company in any way or otherwise be deemed an agent of the
Company.
2. SERVICES TO BE PROVIDED BY THE ADVISER.
The Adviser, at its own expense or pursuant to arrangements with others to
bear the expenses, shall furnish the services described below to the Company
subject to the overall supervision and review of the Company's Board of
Directors ("Board") and in accordance with, as in effect from time to time, the
provisions of the Company's Articles of Incorporation ("Articles"), By-Laws,
registration statements, and applicable law (including, without limitation, the
Act, the 1933 Act, and the Internal Revenue Code). The Adviser shall give the
Company the benefit of its best judgment and efforts in rendering its services
as investment adviser.
(a) INVESTMENT PROGRAM. The Adviser shall continuously furnish an
investment program for the Company. In connection therewith, the Adviser
shall:
(i) manage the assets of the Company that it receives from the
Company, from time to time, to ensure that the Company has, in cash or
qualified investments (as that term is defined by Section 28(b) of the
Act), assets having an aggregate value not less than that required by
applicable law;
(ii) determine, consistent with guidelines provided from time to
time by the Company, what investments the Company shall purchase,
hold, sell, or exchange and what portion, if any, of the Company's
assets shall remain uninvested, and shall take such steps as may be
necessary to implement the same;
(iii) determine, to whatever extent necessary, the manner in
which to exercise any voting rights, rights to consent to corporate
action, or other rights pertaining to the Company's investment
securities; and
(iv) render regular reports to the Company, at regular meetings
of its Board and at such other times as may be reasonably requested by
the Board, of (x) the decisions which it has made with respect to the
investment of the assets of the Company and the purchase and sale of
its investment securities, (y) the reasons for such decisions, and (z)
the extent to which it has implemented those decisions.
(b) PORTFOLIO SECURITIES TRANSACTIONS. The Adviser, subject to and in
accordance with any directions that the Company's Board may issue from time
to time, shall place orders for the execution of the Company's securities
transactions. When placing orders, the Adviser shall seek to obtain the
best net price and execution ("best execution") for the Company, but this
requirement shall not be deemed to obligate the Adviser to place any order
solely on the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The Parties
recognize that there are likely to be many cases in which different brokers
are equally able to provide best execution and that, in selecting among
such brokers with respect to particular trades, it may be desirable to
choose those brokers who furnish research, statistical, quotations and
other information to the Company, as well as the Adviser, in accordance
with the standards set forth below. Moreover, to the extent that it
continues to be lawful to do so and so long as the Board determines that
the Company will benefit, directly or indirectly, by doing so, the Adviser
may place orders with a broker who charges a commission for a securities
transaction which is in excess of the amount of commission that another
broker would have charged for effecting that transaction, provided that the
excess commission is reasonable in relation to the value of "brokerage and
research services" (as defined in Section 28(e)(3) of the Securities
Exchange Act of 1934) provided by that broker. Accordingly, the Company and
the
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Adviser agree that the Adviser shall select brokers for the execution of
the Company's transactions from among:
(i) those brokers and dealers who provide quotations and other
services to the Company, specifically including the quotations
necessary to determine the aggregate assets of the Company, in such
amount of total brokerage as may reasonably be required in light of
such services; and
(ii) those brokers and dealers who supply research, statistical
and other data to the Adviser or its affiliates, which the Adviser or
its affiliates may lawfully and appropriately use in their investment
advisory capacities, which relate directly to securities, actual or
potential, of the Company, or which place the Adviser in a better
position to make decisions in connection with the management of the
Company's assets, whether or not such data may also be useful to the
Adviser and its affiliates in managing other portfolios or advising
other clients, in such amount of total brokerage as may reasonably be
required.
The Adviser shall render regular reports to the Company, not less
frequently than quarterly, of how much total brokerage business has been
placed by the Adviser with brokers falling into each of the categories
referred to above and the manner in which the allocation has been
accomplished. The Adviser agrees that no investment decision will be made
or influenced by a desire to provide brokerage for allocation in accordance
with the foregoing, and that the right to make such allocation of brokerage
shall not interfere with the Adviser's paramount duty to obtain the best
execution for the Company.
(c) TENDER OFFER SOLICITATION FEES. The Adviser shall use its best
efforts to recapture all available tender offer solicitation fees in
connection with tenders of the securities of the Company, and any similar
payments; provided, however, that neither the Adviser, nor any affiliate
of the Adviser shall be required to register as a broker-dealer for this
purpose. The Adviser shall advise the Board of any fees or payments of
whatever type that it may be possible for the Adviser or an affiliate of
the Adviser to receive in connection with the purchase or sale of
investment securities for the Company.
(d) VALUATION OF INVESTMENTS. The Adviser shall value the investments
of the Company as often as necessary to enable the Company to continually
meet the stock and minimum certificate reserve requirements required by the
Act. The Company shall provide, or arrange for others to provide, all
necessary information for the calculation of the aggregate value of the
Company's assets.
(e) ASSISTANCE WITH REGULATORY MATTERS. The Adviser shall provide such
assistance, cooperation, and information to the Company or its designee, as
the same may reasonably request from time to time, to enable the Company
to:
(i) prepare, amend, file, and/or deliver its registration
statements, regulatory reports, periodic reports to shareholders and
other documents (including tax returns) required by applicable law in
a timely manner; and
(ii) develop, implement, maintain, and monitor a compliance
program for assuring compliance with all federal and state securities
law matters.
The Parties acknowledge that the Company or its designee shall have
primary responsibility for the foregoing matters.
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(f) INFORMATION, RECORDS, AND CONFIDENTIALITY.
(i) The Company or its designee shall provide timely
information to the Adviser regarding such matters as cash received
from the issuance of the Certificates, and all other information as
may be reasonably necessary or appropriate for the Adviser to
perform its responsibilities hereunder.
(ii) The Company shall own and control all records maintained
hereunder by the Adviser on the Company's behalf and, upon request of
the Company or in the event of termination of this Agreement for any
reason, the Adviser shall promptly return to the Company all such
records, free from any claim or retention of rights by the Adviser and
without charge by the Adviser except for the Adviser's direct
expenses.
(iii) The Adviser shall not disclose or use any records or
information obtained pursuant hereto except as expressly authorized
herein, and shall keep confidential any information obtained pursuant
hereto, and disclose such information only if the Company has
authorized such disclosure, or if such disclosure is expressly
required by applicable federal or state regulatory authorities.
(g) PERSONNEL. The Adviser shall compensate all Directors, officers
and employees of the Company who are directors, officers, stockholders, or
employees of the Adviser or its affiliates.
(h) DELEGATION TO SUB-ADVISERS. Subject to the approval of the Board
and the shareholders of the Company, the Adviser may delegate to a
sub-adviser certain of its duties herein, provided that the Adviser shall
continue to supervise the performance of any such sub-adviser.
3. EXPENSES OF THE COMPANY.
Except for expenses that the Adviser expressly assumes pursuant to this
Agreement, the Company shall bear, or cause others to bear, all expenses for its
operations and activities, and shall cause the Adviser to be reimbursed, by the
Company or others, for any such expense that the Adviser incurs on behalf of the
Company. The expenses borne by the Company include, without limitation:
(a) fees and expenses paid to the Adviser as provided herein;
(b) expenses of all audits by independent public accountants;
(c) expenses of transfer or dividend disbursing agent, registrar,
custodian, or depository appointed for safekeeping of the Company's cash,
securities, and other property;
(d) expenses of obtaining quotations which assist in calculating the
value of the assets of the Company;
(e) salaries and other compensation of executive officers of the
Company who are not directors, officers, stockholders or employees of the
Adviser or its affiliates;
(f) all taxes levied against the Company, including issuance and
transfer taxes, and corporate fees payable by the Company to federal, state
or other governmental agencies;
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(g) brokerage fees and commissions in connection with the purchase and
sale of securities for the Company, and similar fees and charges for the
acquisition, disposition, lending or borrowing of such securities;
(h) costs, including the interest expense, of borrowing money;
(i) costs incident to meetings of the Board and shareholders of the
Company (exclusive of costs of those Directors and employees of the
Company who are "interested persons" of the Company within the meaning of
the Act);
(j) fees and expenses of Directors who are not "interested persons"
of the Company within the meaning of the Act;
(k) legal fees, including the legal fees related to the registration
and continued qualification of the Certificates for sale;
(l) costs and expense of registering and maintaining the registration
of the Company and the Certificates under federal and any applicable state
laws;
(m) the preparation, setting in type, printing in quantity and
distribution of materials distributed to current and prospective
Certificate holders of the Company, such as prospectuses, supplements
thereto, and any other communications pertaining to the Certificate
holders;
(n) the preparation, setting in type, printing in quantity and
distribution of materials distributed to the shareholders of the Company,
such as periodic reports, proxy materials (including proxy statements and
proxy cards) relating to the Company and the processing, including
tabulation, of the results of voting instruction and proxy solicitations,
and any other communications pertaining to the shareholders;
(o) the fees and expenses involved in the preparation of all reports
as required by federal or state law;
(p) postage;
(q) extraordinary or non-recurring expenses, such as legal claims and
liabilities and litigation costs and indemnification payments by the
Company in connection therewith;
(r) trade association dues for the Investment Company Institute or
similar organizations; and
(s) any errors and omissions or other liability insurance premiums
covering the Directors, officers, and employees of the Company.
4. COMPENSATION OF THE ADVISER.
As compensation to the Adviser for services rendered furnished hereunder,
the Company shall pay the Adviser a fee in the amount and manner set forth in
Schedule A. The fee shall be reduced by any tender solicitation fees received by
the Adviser, or any affiliated person of the Adviser, in connection with the
tender of investments of the Company or any similar payments (less any direct
expenses incurred by the Adviser, or any affiliated person of the Adviser, in
connection with such fees or payments).
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5. ACTIVITIES OF THE ADVISER.
The services of the Adviser to the Company under this Agreement are not
exclusive, and the Adviser and any of its affiliates shall be free to render
similar services to others, so long as its services hereunder are not impaired
thereby. Subject to and in accordance with the Company's Articles of
Incorporation and By-Laws, the Articles of Incorporation and By-Laws of the
Adviser, and any applicable requirements of the Act, it is understood that
Directors, officers, agents, shareholders, and Certificate holders of the
Company are or may be interested persons of the Adviser or its affiliates as
directors, officers, agents, or stockholders, or otherwise; that directors,
officers, agents, or stockholders of the Adviser or its affiliates are or may be
interested persons of the Company as Directors, officers, agents, shareholders
or otherwise; that the Adviser or its affiliates may be interested in the
Company as shareholders or otherwise; and the effect of such interest shall be
governed by the Act.
6. LIABILITIES OF THE ADVISER.
The Adviser shall indemnify and hold harmless the Company and each of its
Directors and officers (or former Directors and officers) and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, "Indemnitees") from all loss, cost, liability, claim, damage, or
expense (including the reasonable cost of investigating and defending against
the same and any counsel fees reasonably incurred in connection therewith)
(collectively, "Loss") incurred by any Indemnitees under the 1933 Act or under
common law or otherwise which arise out of or are based upon or are a result of
(i) the Adviser's willful misfeasance, bad faith, or negligence in the
performance of its duties, or (ii) the reckless disregard of its obligations and
duties under this Agreement, or that of its officers, agents, and employees, in
the performance of this Agreement. In no event shall Adviser be liable to any
Indemnitee for any Loss that does not arise out of or is not based upon or is
not a result of (i) the Adviser's willful misfeasance, bad faith, or negligence
in the performance of its duties, or (ii) the reckless disregard of its
obligations and duties under this Agreement, or that of its officers, agents,
and employees, in the performance of this Agreement.
In case any action shall be brought against any Indemnitee, the Adviser
shall not be liable under its indemnity agreement contained in this paragraph
with respect to any claim made against any Indemnitee, unless the Indemnitee
shall have notified the Adviser in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Indemnitee (or after the Indemnitee shall
have received notice of such service on any designated agent), but failure to
notify the Adviser of any such claim shall not relieve it from liability to the
Indemnitees against whom such action is brought otherwise than on account of
this Section 6. The Adviser shall be entitled to participate at its own expense
in the defense, or, if it so elects, to assume the defense of any suit brought
to enforce any such liability, but if the Adviser elects to assume the defense,
such defense shall be conducted by counsel chosen by it and satisfactory to the
Indemnitees that are defendants in the suit. In the event the Adviser elects to
assume the defense of any such suit and retain such counsel, the Indemnitees
that are defendants in the suit shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Adviser does not elect to
assume the defense of any such suit, the Adviser will reimburse the Indemnitees
that are defendants in the suit for the reasonable fees and expenses of any
counsel retained by them. The Adviser shall promptly notify the Company of the
commencement of any litigation or proceedings in connection with the issuance or
sales of the shares.
7. TERM AND TERMINATION.
(a) TERM. This Agreement shall become effective on the date hereof.
Unless terminated as herein provided, this Agreement shall remain in full
force and effect until
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_____________, 20____, and shall continue in full force and effect
thereafter so long as such continuance is approved at least annually (a) by
either the Directors of the Company or by vote of a majority of the
Company's outstanding voting securities, and (b) in either event by the
vote of a majority of the Directors of the Company 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.
(b) TERMINATION. This Agreement:
(i) may at any time be terminated by the Company without the
payment of any penalty, either by vote of the Board or by vote of a
majority of the Company's outstanding voting securities, on 60 days'
written notice to the Adviser;
(ii) shall automatically and immediately terminate in the event
of its assignment; and
(iii) may be terminated by the Adviser on 60 days' written notice
to the Company.
As used in this Section 7, the terms "assignment," "interested persons,"
and "vote of a majority of the outstanding voting securities" shall have the
meanings set forth for any such terms in the Act.
8. NOTICE.
Any notice under this Agreement shall be given in writing addressed and
delivered, or mailed post-paid, to the other party at any office of such party.
9. SEVERABILITY.
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
10. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
effective as of the date first written above.
INTEGRITY CERTIFICATE COMPANY INTEGRITY MONEY MANAGEMENT,
INC.
By: By:
-------------------------------- -----------------------------------
ATTEST: ATTEST:
By: By:
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SCHEDULE A
This schedule is an integral part of the Agreement to which it is attached.
Capitalized terms used herein have the same meaning as given to them in the
Agreement, except as otherwise noted. This schedule sets out the compensation of
the Adviser for services rendered with respect the Company.
COMPENSATION
For its services during the term of this Agreement, Adviser shall receive a
quarterly fee payable in arrears based on the annual percentage, set forth
below, of the average daily net asset value of the Company's assets that it
manages:
[fee schedule]
Adopted: ___________, 20____.
Last Amended: Not applicable
