SUB-ADVISORY AGREEMENT
Merrimac Advisors Company
One Coronado Place
0000 Xxxxxx Xxxxxxxxx X.X.
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Gentlemen:
Lakeview Securities Corporation ("LSC") is a registered investment advisor under
the Investment Advisers Act of 1940, as amended ("Advisers Act"). LSC serves as
investment adviser to Investors Research Fund, Inc. (the "Fund"), an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "Act") pursuant to an Investment Advisory
Agreement dated December 27, 1993 (the "Fund Agreement"). The Fund is engaged in
the business of investing and reinvesting its assets in securities of the type,
and in accordance with the limitations specified in the Prospectus, Application
and Statement of Additional Information dated January 30, 1996, which is part of
its effective Registration Statement filed with the U.S. Securities and Exchange
Commission (collectively, the "Fund Prospectus"). Merrimac Advisors Company
("Merrimac" or "you") is a registered investment advisor under the Advisers Act.
Xxxxxxx X. Xxxxxx, President, director and sole shareholder of Merrimac and a
director of the Fund, is familiar with the investment strategies employed by LSC
in managing the investment and reinvestment of Fund assets and may be of
assistance to LSC in carrying out its duties and responsibilities under the Fund
Agreement. LSC hereby retains Merrimac as its sub-adviser for the consideration
and upon the terms and conditions hereinafter set forth:
1. Merrimac has received copies of, and is familiar with, each of the following:
(a) The Articles of Incorporation of the Fund;
(b) The By-Laws of the Fund;
(c) The Fund Agreement;
(d) The Fund's Portfolio Compliance Checklist;
(e) The Fund Prospectus;
(f) The Fund's Code of Ethics;
(g) LSC's Code of Ethics.
LSC will furnish to Merrimac from time to time copies of all amendments of or
supplements to the foregoing, if any.
In carrying out its duties and responsibilities as sub- advisor to LSC, Merrimac
shall at all times act in a manner that is consistent with the investment
policies, objectives and restrictions as set forth in the Fund Prospectus.
Furthermore, in the performance of Merrimac's duties hereunder, it shall at all
times act in a manner consistent with the provisions contained in the documents
delivered to Merrimac pursuant to this Section 1, as each of the same may, from
time to time be amended or supplemented.
2. LSC employs Merrimac to assist LSC in managing the investment and
reinvestment of Fund assets and, without limiting the generality of the
foregoing, to review Fund investments and to recommend and, when directed by
LSC, effect investment changes whenever such changes appear to LSC to be
desirable. In addition, you are to perform all statistical, research, economic,
and analysis services necessary or convenient to the performance of your duties
as investment adviser. You will submit to LSC and the Fund such reports relating
to the valuation of the Fund's securities as LSC may reasonably request. Such
services shall be rendered directly to LSC. In addition, upon the request of LSC
or the Fund, you will provide reasonable assistance to LSC, the Fund, and to the
underwriter of the Fund shares and other persons duly authorized to market Fund
shares, in the marketing and promotion of Fund shares. You will promptly deliver
to LSC and the Fund, for their review, not less than three (3) business days
prior to any other use, any marketing and promotional materials prepared by you
for or making reference to the Fund. You agree not to use any marketing,
advertising or promotional material regarding or making reference to LSC or the
Fund that have been objected to in writing by LSC or the Fund. All advice and
recommendations provided by you to LSC will be consistent with the investment
policies, objectives and restrictions of the Fund.
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3. It is understood that you will from time-to-time employ or associate with
yourself such persons as you believe to be particularly fitted to assist you in
the execution of your duties hereunder, the cost of performance of such duties
to be borne and paid by you, and you agree to employ such persons as are
reasonably necessary to carry out your obligations to all of your clients. You
will provide to LSC and the Fund in writing, promptly following request, such
information regarding itself and the Fund's investments as shall be necessary
for the preparation of periodic reports to the Fund's stockholders and such
other documents and papers as may be required to comply with applicable laws and
the rules, regulations and other requirements of the Securities and Exchange
Commission or other federal, state or local governmental agencies including,
without limitation registration statements on Form N-1A, semi-annual reports on
Form N-SAR, proxy statements, periodic statements and reports, other shareholder
communications, and "blue sky" filings. You agree to permit inspection by
officers and directors of LSC and/or the Fund, upon reasonable notice and at
reasonable times, of all records, books, correspondence, stockholder lists, and
other papers and documents maintained or prepared by you in connection with the
Fund's business and affairs. Furthermore, you agree to maintain, preserve and
make available all such records in accordance and compliance with Section 31 of
the Act, Section 204 of the Advisers Act and all governmental regulations and
requirements, as applicable to you in your capacity as sub-adviser to the Fund.
You agree that all records prepared or maintained by you in connection with the
Fund's business and affairs will be the property of the Fund.
4. You will make recommendations with respect to the purchase and sale of
securities for or on account of the Fund. To carry out such decisions, you are
hereby authorized, as LSC's sub- advisor and attorney-in-fact, to place orders
in the Fund's name for the investment and reinvestment of Fund assets when and
as directed by LSC. Notwithstanding the foregoing, all procedures for making
changes in the Fund's portfolio of securities, including procedures for the
placing and confirmation of orders with brokers and dealers, shall at all times
be and remain under the direction and control of the Fund's board of directors
and officers. You will, however, maintain such records and perform such duties
in connection with the Fund's portfolio of securities as may be reasonably
requested by LSC, and as may be required by applicable governmental laws and
regulations.
5. LSC will provide you with all information under its control which may be
reasonably required for the performance of your duties hereunder, and to advise
you promptly of any changes in the Fund's policies which may affect any of your
obligations hereunder. Except as otherwise specifically provided hereinabove,
you shall have no obligation to provide supervisory or administrative services
in connection with the general business and affairs of the Fund.
6. You will assist LSC in its reporting to the board of directors of the Fund at
each regularly scheduled meeting thereof all changes in the Fund's portfolio
since the prior report, and will furnish to LSC from time-to-time such
information as you may believe appropriate concerning the Fund's portfolio,
whether concerning the individual companies whose securities are included in the
Fund's portfolio, the industries in which they are engaged, or the conditions
prevailing in the economy generally. You will also furnish to LSC such
statistical and analytical information with respect to securities in its
portfolio as you may believe appropriate or as LSC or the board of directors of
the Fund may reasonably request. In making purchases and sales of securities,
you will bear in mind the policies set from time-to-time by LSC and the board of
directors of the Fund as well as the limitations imposed in the Fund Prospectus,
the Act, and the Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies. All powers of control over the Fund's
investments shall at all times be and remain in the Fund's directors and
officers, but this section shall not be construed to relieve LSC or Merrimac
from their various obligations to carry out the investment functions delegated
either under the Fund Agreement or this Agreement.
7. In consideration of the services to be rendered by you, LSC agrees to pay to
you a quarterly fee equal to the Applicable Percentage (as defined below) of (a)
the quarterly fee paid to it by the Fund under paragraph 7 of the Fund Agreement
less (b) any portion of the net expenses of the Fund incurred by the Fund during
each of its fiscal years or portions thereof that this Agreement is in effect
which, as to the Fund in any such year, exceeds the limits applicable to the
Fund under the laws or regulations of any state in which Fund shares are
qualified for sale (reduced pro rata for any portion of less than a year). The
Applicable Percentage shall mean (i) for the first 12 months of the term of this
Agreement, eighty percent (80%) and (ii) for each 12- month period thereafter,
fifty percent (50%) or such other percentage as the parties may mutually agree.
An estimated fee shall be paid in advance on or before the tenth day of the
first month of the applicable quarter, subject to reconciliation based on the
actual fee paid to LSC by the Fund and excess net expenses of the Fund for such
quarter. Any overpayment of the quarterly fee shall be repaid by you to LSC upon
demand. Any underpayment of the quarterly fee shall be paid to you within 30
days of the end of such quarter.
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8. LSC shall expect of you, and you will give LSC the benefit of your best
judgment and effort in rendering services to LSC and the Fund, and LSC agrees as
an inducement to your undertaking these services that neither you, nor your
officers, directors, shareholders, employees or agents, or any affiliates of the
foregoing shall be liable for any mistake of judgment, or opinion relating to
portfolio and investment matters of the Fund, except for lack of good faith,
provided that nothing herein shall be deemed to protect or purport to protect,
you against any liability to the Fund or its stockholders, or LSC to which you
would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of your obligations and duties hereunder, or by
reason of your reckless disregard of your obligations and duties hereunder.
9. This Agreement shall become effective as of the date of approval of this
Agreement by the Fund, and shall continue in effect until the first anniversary
of such date, and thereafter for successive twelve-month periods (computed from
each anniversary date), provided that such continuance is specifically approved
at least annually by the board of directors of the Fund in accordance with
Section 15(c) of the Act or by vote of a majority of the outstanding voting
securities (as defined in Section 2(a)(42) of the Act) of the Fund, and, by a
majority of the board of directors who are not parties to this Agreement or
interested persons (as defined in Section 2(a)(19) of the Act) of any such
party. This Agreement shall be terminated, without the payment of any penalty,
upon the termination or expiration of the Fund Agreement. This Agreement may be
terminated, without the payment of any penalty, (a) by a vote of a majority of
the board of directors of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to you, (b) by you on
60 days' written notice to LSC, or (c) by LSC on 60 days' written notice to you.
If, within 90 days after the date hereof, this Agreement shall not have been
approved by the Fund, you will be entitled to terminate this Agreement upon
notice to LSC and will be entitled to any fees earned by you as provided in
Paragraph 7. Termination of this Agreement shall not be deemed to terminate or
otherwise invalidate any other agreement between Merrimac and LSC, except as
otherwise provided herein. Furthermore, termination of this Agreement shall not
be deemed to terminate or otherwise invalidate the Advisory Agreement between
the Fund and LSC.
10. 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 to them by governing law and interpretations
thereof contained in rules or regulations promulgated by the Securities and
Exchange Commission thereunder. You may assign this Agreement in a transaction
in which you rely bona fide upon Rule 2a-6 under the Act upon notice to LSC and
the Fund.
11. In the event this Agreement is terminated for any reason and no subsequent
agreement is entered into between you and LSC, all fees due to you hereunder
shall be prorated as of the effective date of termination and paid within five
(5) business days thereafter. Upon such termination or within a reasonable time
thereafter, you shall surrender to LSC all books, records, correspondence,
stockholders' lists and other papers and documents pertaining to the Fund which
are in your possession or control.
12. No provision of this Agreement may be changed or waived orally, but only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought, and no amendment of this Agreement shall be
effective until approved by (a) the Board of Directors of the Fund, including a
majority of the directors who are not interested persons of LSC, Merrimac or the
Fund, cast in person at a meeting called for the purpose for voting on such
approval, and (b) a majority of the outstanding voting securities of the Fund,
as defined in the Act. Nothing in this Agreement shall be construed as a change
in, modification or amendment to the Fund Agreement.
13. Except to the extent necessary to enable you to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict the right of
Merrimac or of Xxxxxxxx X. Xxxxxx to engage in any other aspects of the
investment advisory or management business or any business ancillary thereto, or
the right of Xxxxxxx X. Xxxxxx, upon the consent of LSC, or any of your other
officers, directors, shareholders, or employees, or any affiliates thereof, to
engage in any business, including acting as investment advisor or manager for
any other person or entity 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 portfolio management or advisory services of any kind to any other
corporation, firm, individual, trust or association.
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14. LSC acknowledges and agrees that you may obtain from broker-dealers approved
by LSC or the board of directors of the Fund, supplemental research, market and
statistical information for use with respect to the Fund. The term "research,
market and statistical information" includes, without limitation, advice as to
the value of securities, the advisability of investing, purchasing and selling
securities, and the availability of securities or purchasers or sellers of
securities, and furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts. LSC understands that such information will be in addition to and not
in lieu of the services required to be performed by you under this Agreement and
that your expenses will not necessarily be reduced as a result of the receipt of
such information. LSC also acknowledges that such information may be useful to
you and your affiliates in providing services to clients other than the Fund,
and that not all such information will at all times be used by you in connection
with the Fund. Finally, LSC acknowledges that information provided to you and
your affiliates by brokers and dealers through whom other clients of yours
effect securities transactions may be useful to you in providing services to the
Fund. Accordingly, LSC understands that investment decisions for the Fund may
not, at all times, be made independently from those of other accounts managed by
you and your affiliates. In furtherance of the foregoing, LSC agrees that, when
the same securities are purchased for or sold by the Fund and any such other
accounts you shall allocate such purchases and sales in a manner deemed by you
to be fair and equitable to all of the accounts, including the Fund and, subject
to your obtaining the best price and execution for your clients (which shall not
necessarily mean the lowest commission available), brokers and dealers providing
research, market and statistical information may be engaged to effect
transactions on behalf of the Fund.
15. All notices and communications to be made hereunder shall be in writing
shall be delivered to LSC or to you, as the case may be, by U.S. certified mail,
return receipt requested, postage prepaid, by commercial courier or by personal
delivery, in each case to the address set forth in this Agreement or to such
other person or address as shall be identified by written notice as provided
herein. Any notice or communication sent by mail as aforesaid, shall be deemed
delivered three (3) business days after deposit in the U.S. mail; any notice
sent personally or by commercial courier shall be deemed delivered upon
confirmation of receipt at such address.
16. This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois and to the extent applicable, the Act and the
Advisor Act. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
17. In connection with the purchase or sale of portfolio securities for the
account of the Fund, neither you nor any of your directors, officers or
employees will act as principal or agent, or receive any commission. You shall,
at the time you place any order to purchase or sell portfolio securities on
behalf of the Fund, inform LSC of any financial interest you have in the issuer
of the securities being purchased or sold. Each Access Person, as defined in
Rule 17(j)-1 in the Act, of Merrimac will provide personal trading reports to a
designated representative of LSC in accordance with the Fund's Code of Ethics.
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18. Nothing in this Agreement shall be construed so as to make LSC and Merrimac
partners or joint venturers. Except in the performance of its duties hereunder,
Merrimac is and shall be an independent contractor. Unless otherwise expressly
provided or authorized, Merrimac shall have no authority to act for or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund or of LSC.
19. Merrimac has delivered to LSC and the Fund its Codes of Ethics. Merrimac
agrees that any amendments that it may adopt to its Code of Ethics shall be
submitted to and reasonably satisfactory to LSC.
If the foregoing is satisfactory to you, please indicate your acceptance by
signing below.
Very truly yours,
LAKEVIEW SECURITIES CORPORATION
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
By:
Title:
Accepted this ___ day of
______________________, 1997
MERRIMAC ADVISORS COMPANY
By:
Title:
Acknowledged this ___ day of
________________________, 1997
INVESTORS RESEARCH FUND, INC.
By:
Title:
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