INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-advisory Agreement ("Agreement") is made and entered
into as of May 13, 2004, by and between Merit Advisors, Inc., an Oklahoma
corporation ("Advisor") and Avondale Investments, LLC, a Oklahoma limited
liability company ("Sub-Advisor").
WHEREAS, the Advisor acts as the investment advisor to Merit High Yield
Fund II ("Fund"), a series of the Merit Advisors Investment Trust II, a Delaware
statutory trust ("Trust") pursuant to that certain Investment Advisory
Agreement, dated May 13, 2004, between the Advisor and the Trust ("Advisory
Agreement");
WHEREAS, the Trust is an open-end management investment company, registered
under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, each of the Advisor and Sub-Advisor is registered as an investment
advisor under the Investment Advisers Act of 1940 ("Advisers Act"), and engages
in the business of asset management; and
WHEREAS, the Advisor, subject to the approval of the Board of Trustees of
the Trust ("Trustees"), desires to retain the Sub-Advisor to assist the Advisor
in rendering certain investment management services to the Fund, and the
Sub-Advisor is willing to render such services;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Engagement and Obligations of Sub-Advisor. The Advisor hereby
appoints and retains the Sub-Advisor to act as sub-Advisor to Advisor and to
provide the following services for the period and on the terms and conditions
set forth in this Agreement.
(a) Services. The Sub-Advisor agrees to perform the following services
(the "Services"):
(1) provide advice and recommendations to the Advisor regarding the
securities to be purchased, retained or sold with respect to the
Fund;
(2) provide advice and recommendations to the Advisor regarding the
selection of brokers and dealers to execute the purchase and/or
sale of portfolio securities for the Fund;
(3) provide the Advisor and the Trust with records concerning the
Sub-Advisor's activities under this Agreement which the Trust and
the Fund are required to maintain; and
(4) render regular reports to the Advisor and the Trustees concerning
the Sub-Advisor's discharge of the foregoing responsibilities.
The Sub-Advisor shall discharge the foregoing responsibilities subject to
the control of the Trustees and officers of the Trust and in compliance
with (i) such policies as the Trustees may from time to time establish;
(ii) the Fund's objectives, policies, and limitations as set forth in its
prospectus ("Prospectus") and statement of additional information
("Statement of Additional Information"), as the same may be amended from
time to time; and (iii) with all applicable laws and regulations. All
Services to be furnished by the Sub-Advisor under this Agreement may be
furnished through the medium of any directors, officers or employees of the
Sub-Advisor or through such other parties as the Sub-Advisor may determine
from time to time.
(b) Expenses and Personnel. The Sub-Advisor agrees, at its own expense
or at the expense of one or more of its affiliates, to render the Services
and to provide the office space, furnishings, equipment and personnel as
may be reasonably required to perform the Services on the terms and for the
compensation provided herein.
(c) Books and Records. All books and records prepared and maintained
by the Sub-Advisor for the Advisor and/or the Trust and the Fund under this
Agreement shall be the property of the Advisor and/or the Trust and the
Fund and, upon request therefor, the Sub-Advisor shall surrender to the
appropriate party such of the books and records so requested.
2. Compensation of the Sub-Advisor. The Advisor will pay to the
Sub-Advisor an investment advisory fee (the "Fee") equal to an annualized rate
of 0.375% of the average daily net assets of the Fund. The Fee shall be
calculated as of the last business day of each month based upon the average
daily net assets of the Fund determined in the manner described in the Fund's
Prospectus and/or Statement of Additional Information, and shall be paid to the
Sub-Advisor by the Advisor within five (5) days after such calculation.
3. Status of Investment Sub-Advisor. The services of the Sub-Advisor to
the Advisor, the Trust and the Fund are not to be deemed exclusive, and the
Sub-Advisor shall be free to render similar services to others (including,
without limitation, the Merit Advisors Investment Trust) so long as its services
to the Trust and the Fund are not impaired thereby. The Sub-Advisor shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Advisor,
the Trust or the Fund in any way or otherwise be deemed an agent of the Advisor,
the Trust or the Fund. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Sub-Advisor, who may also be a
trustee, officer or employee of the Advisor or the Trust, to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any other business, whether of a similar nature or a dissimilar
nature.
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4. Permissible Interests. Trustees, agents, and stockholders of the
Trust and the Advisor are or may be interested in the Sub-Advisor (or any
successor thereof) as directors, partners, officers, or stockholders, or
otherwise; and directors, partners, officers, agents, and stockholders of the
Sub-Advisor are or may be interested in the Advisor or the Trust as trustees,
directors, officers, stockholders or otherwise; and the Sub-Advisor (or any
successor) is or may be interested in the Advisor or the Trust as a stockholder
or otherwise.
5. Limits of Liability; Indemnification. The Sub-Advisor assumes no
responsibility under this Agreement other than to render the services called for
hereunder. The Sub-Advisor shall not be liable for any error of judgment or for
any loss suffered by the Advisor, the Trust or the Fund in connection with the
matters to which this Agreement relates, except a loss resulting from a breach
of fiduciary duty with respect to receipt of compensation for services (in which
case any award of damages shall be limited to the period and the amount set
forth in Section 36(b)(3) of the Act) or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of, or
from reckless disregard by it of its obligations and duties under, this
Agreement. It is agreed that the Sub-Advisor shall have no responsibility or
liability for the accuracy or completeness of the Trust's registration statement
under the Act or the Securities Act of 1933 ("1933 Act"), except for information
supplied by the Sub-Advisor for inclusion therein.
The Sub-Advisor will indemnify the Advisor and its directors, members,
trustees, officers, employees and agents ("Advisor Parties") against and hold
the Advisor Parties harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses) arising
from any claim, demand, action or suit which results from the Sub-Advisor
Parties' (as such term is defined immediately below) willful misfeasance, bad
faith, gross negligence or reckless disregard of the Sub-Advisor's obligations
and duties under this Agreement.
The Advisor will indemnify the Sub-Advisor and its directors, members,
officers, employees and agents ("Sub-Advisor Parties") against and hold the
Sub-Advisor Parties harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses) arising
from any claim, demand, action or suit which results from the Advisor Parties'
willful misfeasance, bad faith, gross negligence or reckless disregard of the
Advisor's obligations and duties under this Agreement.
6. Term. This Agreement shall remain in effect for an initial term of
two years from the date hereof, and from year to year thereafter provided such
continuance is approved at least annually by the vote of a majority of the
trustees of the Trust who are not "interested persons" (as defined in the Act)
of the Trust, which vote must be cast in person at a meeting called for the
purpose of voting on such approval; provided, however, this Agreement may be
terminated at any time on at least 60 days prior written notice to the
Sub-Advisor, without the payment of any penalty, (i) by vote of the Trustees,
(ii) by the Advisor, or (iii) by vote of a majority of the outstanding voting
securities (as defined in the 0000 Xxx) of the Portfolio. The Sub-Advisor may
terminate this Agreement at any time, without the payment of any penalty, on at
least 60 days prior written notice to the Advisor and the Trust. This Agreement
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will automatically and immediately terminate in the event of its assignment (as
defined in the 0000 Xxx) or upon the termination of the Investment Advisor
Agreement.
7. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by vote of the holders of a majority of the Trust's outstanding
voting securities.
8. Applicable Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Delaware, without regard to the
principles of the conflict of laws or the choice of laws.
9. Representations and Warranties.
(a) Representations and Warranties of the Sub-Advisor. The Sub-Advisor
hereby represents and warrants to the Advisor and the Trust as follows: (i)
the Sub-Advisor is a limited liability company duly organized and in good
standing under the laws of the State of Oklahoma and is fully authorized to
enter into this Agreement and carry out its duties and obligations
hereunder; and (ii) the Sub-Advisor is registered as an investment advisor
with the SEC under the Advisers Act, and shall maintain such registration
in effect at all times during the term of this Agreement.
(b) Representations and Warranties of the Advisor. The Advisor hereby
represents and warrants to the Sub-Advisor as follows: (i) the Advisor is a
corporation duly organized and in good standing under the laws of the State
of Oklahoma and is fully authorized to enter into this Agreement and carry
out its duties and obligations hereunder; and (ii) the Advisor is
registered as an investment advisor with the SEC under the Advisers Act,
and shall maintain such registration in effect at all times during the term
of this Agreement.
10. 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 and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
11. Notice. Notices of any kind to be given to the Advisor hereunder by
the Sub-Advisor shall be in writing and shall be duly given if mailed or
delivered to the Merit Advisors, Inc., 00000 Xxxxx Xxxxx Xxxx, Xxxxx 000,
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000, Attention J. Xxxx Xxxxxxxxxx or to such
other address or to such individual as shall be so specified by the Advisor to
the Sub-Advisor. Notices of any kind to be given to the Sub-Advisor hereunder by
the Advisor shall be in writing and shall be duly given if mailed or delivered
to Avondale Investments, LLC, 000 Xxxxx Xxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxx,
Xxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxxxxx, or at such other address or to
such individual as shall be so specified by the Sub-Advisor to the Advisor.
Notices shall be effective upon delivery.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and the year first written above.
MERIT ADVISORS, INC. AVONDALE INVESTMENTS, LLC
/s/ J. Xxxx Xxxxxxxxx /s/ Xxxxxx X. Xxxxxxxxxx
______________________________ ___________________________
By: J. Xxxx Xxxxxxxxxx By: Xxxxxx X. Xxxxxxxxxx
Title: President Title: Manager
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