FORM OF INVESTMENT ADVISORY AGREEMENT
JACOB INTERNET FUND INC.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
_______, 1999
Jacob Asset Management LLC
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting the assets of Jacob Internet Fund Inc. (the "Fund"), in securities
of the type, and in accordance with the limitations, specified in our Articles
of Incorporation, By-Laws and Registration Statement filed with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the "1940
Act") and the Securities Act of 1933, including the Prospectus forming a part
thereof (the "Registration Statement"), all as from time to time in effect, and
in such manner and to such extent as may from time to time be authorized by the
Fund's Board of Directors. We enclose copies of the documents listed above and
will furnish you such amendments thereto as may be made from time to time.
2. (a) We hereby employ you to manage the investment and
reinvestment of our assets as above specified, and, without limiting the
generality of the foregoing, to provide the management and other services
specified below.
(b) Subject to the general control of the Fund's Board of
Directors, you will make decisions with respect to all purchases and sales of
our portfolio securities. To carry out such decisions, you are hereby
authorized, as our agent and attorney-in-fact, for our account and at our risk
and in our name, to place orders for the investment and reinvestment of our
assets. In all purchases, sales and other transactions in our portfolio
securities you are authorized to exercise full discretion and act for us in the
same manner and with the same force and effect as our corporation itself might
or could do with respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to the furtherance
or conduct of such purchases, sales or other transactions. In furtherance of
such and subject to applicable law and procedures adopted by the Fund's Board of
Directors, you may (i) pay commissions to brokers other than yourself which are
higher than such that might be charged by another qualified broker to obtain
brokerage and/or research services considered by you to be useful or desirable
for your investment management of the Fund
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and/or other advisory accounts of yours and any investment advisor affiliated
with you; and (ii) consider the sales of shares of the Fund by brokers including
your affiliates as a factor in your selection of brokers for portfolio
transactions.
(c) You will report to the Fund's Board of Directors at
each meeting thereof all changes in the Fund since your prior report, and will
also keep us in touch with important developments affecting the Fund and, on
your own initiative, will furnish us from time to time with such information as
you may believe appropriate for this purpose, whether concerning the individual
entities whose securities are included in the Fund the activities in which such
entities engage, Federal income tax policies applicable to our investments, or
the conditions prevailing in the economy generally. You will also furnish us
with such statistical and analytical information with respect to our portfolio
securities as you may believe appropriate or as we may reasonably request. In
making such purchases and sales of our portfolio securities, you will comply
with the policies set from time to time by the Fund's Board of Directors as well
as the limitations imposed by our Articles of Incorporation, the provisions of
the Internal Revenue Code relating to regulated investment companies and the
1940 Act, and the limitations contained in our Registration Statement.
(d) It is understood that you may from time to time employ,
subcontract with or otherwise associate yourself with, entirely at your expense,
such persons as you believe to be particularly fitted to assist you in the
execution of your duties hereunder.
(e) You or your affiliates will also provide supervisory
personnel who will be responsible for supervising and monitoring the performance
of our Administrator in connection with its duties under our Administrative
Services Agreement. Such personnel may be your employees or employees of your
affiliates or of other organizations. It is understood that we have retained, at
our expense, the Administrator to perform the operational components of the
functions and services listed herein.
(f) You or your affiliates will also furnish us such
additional administrative supervision and such office facilities as you may
believe appropriate subject to the requirements of any regulatory authority to
which you may be subject. We will reimburse you for all of our operating costs
incurred by you, including rent, depreciation of equipment and facilities,
interest and amortization of loans financing equipment used by us and all the
expenses incurred to conduct our affairs. The amounts of such reimbursements
shall from time-to-time be agreed upon between us.
3. We agree, subject to the limitations described below, to
be responsible for, and hereby assume the obligation for payment of, all our
expenses including: (a) brokerage and commission expenses; (b) foreign, federal,
state or local taxes, including issuance and transfer taxes incurred by or
levied on us; (c) commitment fees, certain insurance premiums and membership
fees and dues in investment company organizations; (d) interest charges on
borrowings; (e) charges and expenses of our custodian; (f) charges and expenses
relating to the issuance, redemption, transfer and dividend disbursing functions
for us; (g) telecommunications expenses; (h) recurring and non-recurring legal,
accounting and recordkeeping expenses; (i) costs of organizing and maintaining
the Fund's existence as a corporation; (j) compensation, including directors'
fees, of any of our directors, officers or
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employees who are not your officers or employees or those of the Administrator
or their affiliates, and costs of other personnel providing administrative and
clerical services to us; (k) costs of providing shareholders' services,
including charges and expenses of persons providing confirmations of
transactions in the Fund's shares, periodic statements to shareholders and
recordkeeping services, and costs of shareholders' reports, proxy solicitations,
and corporate meetings; (l) fees and expenses of registering our shares under
the appropriate federal securities laws and of qualifying our shares under
applicable state securities laws, including expenses attendant upon the initial
registration and qualification of these shares and attendant upon renewals of,
or amendment to, those registrations and qualifications; (m) expenses of
preparing, printing and delivering the initial registration statement and of
preparing, printing and delivering the Prospectus to existing shareholders and
of printing shareholder application forms for shareholder accounts; (n) fees and
expenses payable to the Adviser, Distributor, Administrator, custodian, transfer
agent and dividend agent; and (o) any other distribution or promotional expenses
contemplated by an effective plan adopted by us pursuant to Rule 12b-1 under the
1940 Act.
4. We will expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you will not be
liable hereunder for any mistake of judgment or for any other cause, provided
that nothing herein shall protect you against any liability to us or to our
security holders by reason of willful misfeasance, bad faith or gross negligence
in the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. (a) In consideration of the foregoing we will pay you an
annual fee equal to 1.25% of the Fund's annual average daily net assets. Your
fee will be accrued by us daily, and will be payable on the last day of each
calendar month for services performed hereunder during that month or on such
other schedules as you shall request of us in writing. You may waive your right
to any fee to which you are entitled hereunder, provided such waiver is
delivered to us in writing. Any reimbursement of our expenses, to which we may
become entitled pursuant to the last sentence of paragraph 3 hereof, will be
paid to us at the end of the month for which those expenses are accrued, at the
same time as we pay you your fee. You may from time to time and for such periods
as you deem appropriate, or for such time and to the extent agreed on Exhibit A,
waive your fee and/or assume expenses for the Fund (including initial
organizational costs); provided, however that with respect to any agreement set
forth on Exhibit A you shall be entitled to recoup such amounts for a period of
up to three (3) years from the date such fee was waived or such amount assumed.
(b) Pursuant to the Fund's Distribution and Service Plan
and the Shareholder Servicing Agreement, you will also act as a shareholder
servicing agent for the Fund pursuant to which the Fund is permitted to pay you
a maximum of 0.25% per annum of the Fund's average daily net assets to
compensate you for providing shareholder services and to permit you to
compensate banks, broker-dealers, savings and loans and other financial
institutions (the Adviser, with such other institutions, each a "Shareholder
Servicing Agent") whose clients are Fund shareholders for providing shareholder
services. Further, pursuant to the Fund's Distribution and Service Plan and the
Distribution Agreement, the Distributor will receive a distribution fee to
compensate the Distributor for providing distribution assistance or for
arranging for others to provide distribution assistance with respect to sales of
our shares. In addition, you may use the advisory fee for distribution of our
shares and for servicing purposes including defraying the costs of performing
shareholder servicing functions on behalf of the Fund and to compensate others
with whom you may have entered into a written agreement for performing
shareholder servicing functions on behalf of the Fund. To the extent that you or
865463.1
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your affiliates directly may make payments to other third parties who render
shareholder support services or distribution assistance and that such payments
may be deemed indirect financing of an activity primarily intended to result in
the sale of shares of the Fund within the context of Rule 12b-1 under the 1940
Act (the "Rule"), then such payments by you shall be deemed to be authorized
under the Fund's Distribution and Service Plan adopted pursuant to the Rule. You
will, in your sole discretion, determine the amount of such payments and may
from time to time in your sole discretion increase or decrease the amount of
such payments; provided, however, that no such payment will increase the amount
the Fund is required to pay you or any person under this Agreement or any
agreement. Any payments made by you for such purposes are subject to compliance
with the terms of written agreements in a form satisfactory to the Fund's Board
of Directors to be entered into by you and the participating organization.
6. This Agreement will become effective on _______, 1999
and shall continue in effect until _______, 2001 and thereafter for successive
twelve-month periods (computed from each ______), provided that such
continuation is specifically approved at least annually by the Fund's Board of
Directors or by a majority vote of the holders of the Fund's outstanding voting
securities, as defined in the 1940 Act, and, in either case, by a majority of
those of the Fund's Directors who are neither party to this Agreement nor, other
than by their service as Directors of the Fund, interested persons, as defined
in the 1940 Act, of any such person who is party to this Agreement. Upon the
effectiveness of this Agreement, it shall supersede all previous Agreements
between us covering the subject matter hereof. This Agreement may be terminated
at any time, without the payment of any penalty, by vote of a majority of the
Fund's outstanding voting securities, as defined in the 1940 Act, or by a vote
of a majority of the entire Board of Directors, on sixty days' written notice to
you, or by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
8. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or restrict your
right, or the right of any of your officers, directors or employees who may also
be a director, officer or employee of ours, or of a person affiliated with us,
as defined in the 1940 Act, to engage in any other business or to devote time
and attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association.
(b) The Fund understands that you and your affiliates and
employees, as well as their agents privy to the transactions made in the Fund's
account, may, subject to the Fund's and to your Code of Ethics, purchase and
sell investments for either your or their own account, which investments may
include the same investments that the Fund's account is purchasing or selling;
provided, however, that no purchase or sale by you, or any of your
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affiliates, agents or employees, or any of their agents privy to the
transactions made in the Fund's account, will be made in a manner which would
result in any detriment to the Fund, and such persons shall always keep the
interests of the Fund first in effecting any such transaction.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
JACOB INTERNET FUND INC.
By:_________________________________________
Name:
Title:
ACCEPTED:
JACOB ASSET MANAGEMENT LLC
By:__________________________________________
Name:
Title:
865463.1
Exhibit A to the Investment Advisory Agreement
The Adviser hereby agrees that until [_____________, 2000], the
Adviser will waive its fees and/or reimburse the Fund's operating expenses to
the extent necessary to ensure that the Fund's total operating expenses (on an
annual basis) do not exceed [2.00%] of its average daily net assets, subject to
possible later recoupment as provided in Section 5(a) of this Agreement.
Executed as of this ___ day of September, 1999.
Jacob Asset Management LLC
By: ______________________
Jacob Internet Fund Inc.
By: _______________________
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