INVESTMENT ADVISORY AGREEMENT
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AGREEMENT made as of October 1, 1994 and as amended January 1, 1996 by and
between THE OBERWEIS FUNDS, a Massachusetts business trust (the "Fund"), and
OBERWEIS ASSET MANAGEMENT, INC., an Illinois corporation (the "Adviser").
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"), the units
of beneficial interest ("Shares") of which are registered under the Securities
Act of 1933 (the "1933 Act"); and
WHEREAS, the Fund is authorized to issue Shares in separate series with
each such series representing the interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently offers Shares in two portfolios, the Oberweis
Emerging Growth Portfolio and the Oberweis Micro-Cap Portfolio (the "current
Portfolios"), together with any other Fund portfolios which may be established
later and served by the Adviser hereunder, being herein referred to collectively
as the "Portfolios" and individually referred to as a "Portfolio"; and
WHEREAS, the Fund desires at this time to retain the Adviser to render
investment advisory services to the current Portfolios of the Fund, and the
Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Initial Appointment of Adviser. The Fund hereby appoints the Adviser
to act as investment adviser to the current Portfolios of the Fund for the
period and on the terms herein set forth. The Adviser accepts such appointment
and agrees to render the services herein set forth for the compensation herein
provided.
2. Subsequent Appointments of Adviser. In the event that the Fund
establishes one or more portfolios other than the current Portfolios with
respect to which it desires to retain the Adviser to render investment advisory
services hereunder, it shall notify the Adviser in writing. If the Adviser is
willing to render such services, it shall notify the Fund in writing, whereupon
such portfolio or portfolios shall become a Portfolio or Portfolios hereunder.
3. Delivery of Documents. The Fund has delivered (or will deliver as soon
as is possible) to the Adviser copies of each of the following documents and
will deliver to the Adviser all future amendments and supplements:
(a) Agreement and Declaration of Trust of the Fund dated July 7, 1986
(such Agreement and Declaration of Trust, as presently in effect and as amended
from time to time, is herein called the "Trust Agreement"), a copy of which also
is on file with the Secretary of the Commonwealth of Massachusetts.
(b) By-Laws of the Fund (such By-Laws, as presently in effect and as
amended from time to time, are herein called the "By-Laws").
(c) Certified resolutions of the Trustees and Shareholders of the Fund
authorizing the appointment of the Adviser and approving this Agreement.
(d) Registration Statement under the 1933 Act and under the 1940 Act
on Form N-1A (the "Registration Statement") as filed with the Securities and
Exchange Commission and all amendments thereto.
(e) Current prospectus and statement of additional information of the
Fund (such prospectus and statement of additional information as then in effect
and as amended, supplemented and/or superseded from time to time, are herein
collectively called the "Prospectus").
4. Duties of the Adviser. Subject to the general supervision of the
Trustees of the Fund, the Adviser shall manage the investment operations of any
Portfolio and the composition of such Portfolio's assets, including the
purchase, retention and disposition thereof, in accordance with the policies of
the Fund as stated in the Prospectus and with the investment objective(s) of
such Portfolio and subject to the following understandings:
(a) The Adviser shall use the same skill and care in the management of
the Portfolio as is required to be used in the discharge of fiduciary duties
under the 1940 Act, the Investment Advisers Act of 1940 (the "1940 Advisers
Act"), the 1933 Act and the Internal Revenue Code of 1986 (the "Code").
(b) The Adviser shall provide supervision of the Portfolio's assets;
furnish a continuous investment program for such Portfolio; determine from time
to time what investments or securities will be purchased, retained or sold by
the Portfolio, and what portion of the assets will be invested or held
uninvested as cash.
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(c) The Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Trust Agreement, By-Laws,
Registration Statement and Prospectus and with the instructions and directions
of the Trustees of the Fund, and will comply with and conform to the
requirements of the 1940 Act, the 1940 Advisers Act, the 1933 Act and the Code
(applicable to the Fund as a regulated investment company or otherwise) as each
may from time to time be amended, and all other applicable federal and state
laws, regulations and rulings.
(d) The Adviser shall determine the securities to be purchased or sold
by the Portfolio and will place orders pursuant to its determinations either
directly with the issuer or underwriter or with any broker-dealer (including, as
set forth below, a broker-dealer which is an affiliated person of the Adviser)
who deals in the securities in which the Portfolio is active. In placing orders
with broker-dealers, the Adviser will attempt to obtain the best combination of
price and execution. In seeking to achieve the best combination of price and
execution, an effort shall be made to evaluate the overall quality and
reliability of broker-dealers and the service they provide, including their
general execution capability, reliability and integrity, willingness to take
positions in securities, general operational capabilities and financial
condition. However, the responsibility of the Adviser to attempt to obtain the
best combination of price and execution does not obligate it to solicit a
competitive bid for each transaction, and the Adviser shall have no obligation
to seek the lowest available commission cost to the Portfolio, so long as the
Adviser determines in good faith that the commission paid to a broker-dealer is
reasonable in relation to the value of the brokerage, research, statistical or
other services provided by such broker-dealer to the Portfolio or the Adviser.
The Adviser will not place orders with broker-dealers which are affiliated
persons of the Adviser or the Fund without the prior written authorization of
the Fund, and then will do so subject to (i) the provisions of Sections 17(e)(2)
and Rule 17e-1 and Section 10(f) and Rule 10f-3 under the 1940 Act, Rule 206(3)-
2 under the 1940 Advisers Act, Section 11(a) under the Securities Exchange Act
of 1934 (the "1934 Act") and any other applicable laws or regulations, and (ii)
procedures properly adopted by the Fund with respect thereto.
(e) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of a Portfolio as well as other clients, if
any (including any other Portfolio), the Adviser, to the extent permitted by
applicable laws and regulations, may aggregate the securities to be purchased or
sold. In such event, allocation of the securities so purchased or sold will be
made by the Adviser in a manner it considers to be equitable and consistent with
its fiduciary obligations to each, and transaction costs will be allocated so
that each receives, to the extent possible, the same price.
(f) The Adviser shall render to the Trustees of the Fund such periodic
and special reports as the Trustees may reasonably request.
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(g) The Adviser, and not the Fund, shall pay the salaries and fees of
any officers or Trustees of the Fund who are "interested persons" (as defined in
the 0000 Xxx) and who are employed by the Adviser to perform services relating
to the Fund.
(h) The services of the Adviser to a Portfolio under this Agreement
are not to be deemed exclusive and the Adviser shall be free to render similar
or other services in the future to the Fund or to others so long as its services
under this Agreement are not impaired thereby.
5. Transaction Procedures. All transactions will be consummated by
payment to or delivery by the Custodian, or such depositories or agents as may
be designated by the Custodian in writing, as custodian for the Fund, of all
cash and/or securities due to or from the Portfolio, and the Adviser shall not
have possession or custody thereof or any responsibility or liability with
respect thereto. The Adviser shall advise the Custodian of all investment
orders at the time and in the manner as prescribed by the Fund. The Fund shall
issue to the Custodian such instructions as may be appropriate in connection
with the settlement of any transaction initiated by the Adviser. The Fund shall
be responsible for all custodial arrangements and the payment of custodial
charges and fees, and, upon giving proper instructions to the Custodian, the
Adviser shall have no responsibility or liability with respect to custodial
arrangements or the acts, omissions or other conduct of the Custodian.
6. Adoption of Ethics Code. The Adviser has or will adopt a written code
of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and
has or will provide the Fund with a copy of such ethics code and evidence of its
adoption. Upon written request of the Fund, the Adviser shall permit the Fund,
its employees or its agents to examine the reports required to be made by the
Adviser under Rule 17j-1(c)(1).
7. Books and Records. The Adviser agrees that all records which it
maintains for the Fund are the property of the Fund and it will surrender
promptly to the Fund any of such records upon the Fund's request. The Adviser
further agrees to maintain, keep current and preserve, on behalf of the Fund, in
the manner required or permitted under the 1940 Act, the records relating to the
activities performed by the Adviser under this Agreement as are required to be
maintained under the 1940 Act.
8. Compensation. For the services provided pursuant to this Agreement,
the Fund will pay to the Adviser at the end of each calendar month, an
investment advisory fee based on the average daily net assets of each Portfolio,
computed at the following annual rates:
(a) For the Oberweis Emerging Growth Portfolio:
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.45% of the first $50 million of average daily net assets; plus
.40% of the average daily net assets over $50 million.
(b) For the Oberweis Micro-Cap Portfolio:
.60% of average daily net assets.
For the month and year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the number of days that
the Agreement is in effect during the month and year, respectively.
In addition to the compensation provided above, the Fund shall reimburse to
the Adviser on a monthly basis those expenses which are to be borne by the Fund
but, from time to time may be incurred by the Adviser for the benefit of the
Fund in connection with the performance of the Adviser's duties.
9. Limitation of Liability. Subject to Section 36 of the 1940 Act,
neither the Adviser nor any of its agents or employees shall be liable for any
error of judgment, act or omission, or mistake of law or for any loss suffered
by the Fund or its Shareholders in connection with the matters to which this
Agreement relates, except liability to the Fund or the Shareholders to which the
Adviser would otherwise be subject by reason of the Adviser's willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
10. Indemnification. (a) Subject to the conditions set forth below, the
Fund agrees to indemnify and hold harmless the Adviser, its officers and
employees, and each person, if any, who controls the Adviser within the meaning
of Section 15 of the 1933 Act against any and all loss, liability, claim, damage
and expense whatsoever jointly and severally (including, but not limited to, any
and all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's Registration Statement or
the Prospectus or any amendment or supplement thereto, or any advertisement or
sales literature authorized by the Fund, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading, unless such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Fund by or on behalf of the Adviser expressly for use in the Fund's
Registration Statement, prospectus, statement of additional information or any
amendment or supplement thereof or any advertisement, or sales literature.
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If any action is brought against the Adviser or any controlling person thereof
in respect of which indemnity may be sought against the Fund pursuant to the
foregoing, the Adviser shall promptly notify the Fund in writing of the
institution of such action and the Fund shall assume the defense of such action,
including the employment of counsel selected by the Fund and payment of
expenses. The Adviser, or any such controlling person thereof, shall have the
right to employ separate counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Adviser or such controlling person
unless the employment of such counsel shall have been authorized in writing by
the Fund in connection with the defense of such action or the Fund shall not
have employed counsel to have charge of the defense of such action, in which
event such fees and expenses shall be borne by the Fund. Anything in this
subparagraph to the contrary notwithstanding, the Fund shall not be liable for
any settlement of any such claim or action effected without its written consent.
The Fund agrees promptly to notify the Adviser of the commencement of any
litigation or proceedings against the Fund or any of its officers or directors
or controlling persons in connection with the issue and sale of shares or in
connection with the Fund's Registration Statement, prospectus or statement of
additional information, or any advertisement or sales literature.
(b) The Adviser agrees to indemnify and hold harmless the Fund, each
of its Trustees, each of its officers and each other person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act, with respect
to statements or omissions, if any, made in the Fund's Registration Statement,
prospectus or statement of additional information or any amendment or supplement
thereof or any advertisement or sales literature in reliance upon and in
conformity with information in writing furnished to the Fund with respect to the
Adviser by or on behalf of the Adviser expressly for use in the Fund's
Registration Statement, prospectus or statement of additional information or any
amendment or supplement thereof or any advertisement or sales literature. In
case any action shall be brought against the Fund or any other person so
indemnified based on the Fund's Registration Statement, prospectus or statement
of additional information or any amendment or supplement thereof and in respect
of which indemnity may be sought against the Adviser, the Adviser shall have the
rights and duties given to the Fund and the Fund and each other person so
indemnified shall have the rights and duties given to the Adviser by the
provisions of subparagraph (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Fund or its shareholders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the duties of such person or by reason of the
reckless disregard by such person of the obligations and duties of such person
under this Agreement.
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11. Duration and Termination. Provided that agreement is approved by
shareholders of the current Portfolios within 120 days of the effective date,
this Agreement, unless sooner terminated as provided herein, shall remain in
force until __________________, 1997, and thereafter, in the case of the current
Portfolios and each other Portfolio to which this Agreement shall have become
applicable, this Agreement shall continue in force from year to year, but only
so long as such continuance is approved at least annually in the manner required
by the 1940 Act and the rules and regulations thereunder; provided, however,
that (i) the continuance of this Agreement insofar as it pertains to each of the
Portfolios other than the current Portfolios, be subject to the approval of this
Agreement by a majority of the outstanding Shares (as so defined) representing
the interests in such Portfolios and (ii) if the continuation of this Agreement
is not approved for a Portfolio, Adviser may continue to serve in such capacity
for such Portfolio in the manner and to the extent permitted by the 1940 Act and
the rules and regulations thereunder. This Agreement may be terminated with
respect to all or any of the Portfolios by the Fund at any time, without the
payment of any penalty, by vote of a majority of the Trustees of the Fund or by
vote of a majority of the outstanding Shares (as so defined), representing the
interests in each Portfolio with respect to which this Agreement is to be
terminated on sixty (60) days written notice to the Adviser, or by the Adviser
at any time without the payment of the penalty on sixty (60) days written notice
to the Fund.
12. Assignment. This Agreement will automatically and immediately
terminate in the event of its "assignment" (as defined in Section 2(a)(4) of the
1940 Act). The Adviser shall notify the Fund in writing sufficiently in advance
of any proposed change of control, as defined in Section 2(a)(9) of the 1940
Act, as will enable the Fund to consider whether an "assignment" will occur, and
to take the steps necessary to enter into a new contract with the Adviser.
13. Status of Adviser as Independent Contractor. The Adviser shall for
all purposes herein be deemed to be an independent contractor, and shall, unless
otherwise expressly provided herein or authorized by the Trustees of the Fund
from time to time, have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund.
14. Affiliations. Subject to applicable statutes and regulations, it is
understood that trustees, officers or agents of the Fund are or may be
interested in the Adviser as officers, directors, agents, shareholders or
otherwise, and that the officers, directors, shareholders and agents of the
Adviser may be interested in the Fund otherwise than as a trustee, officer or
agent.
15. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Fund must be (a) by vote of a majority of those
Trustees of the Fund who are not parties to this Agreement or interested persons
(as defined in the 0000 Xxx) of any such party at a meeting called for the
purpose of voting on such amendment, and (b) by vote of a
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majority of the outstanding Shares (as defined with respect to voting securities
in the 1940 Act) representing the interests in each Portfolio affected by such
amendment.
16. Limitation of Liability of Shareholders and Trustees. This Agreement
is executed by or on behalf of the Fund and the Adviser is hereby expressly put
on notice of the limitation of Shareholder and Trustee liability as set forth in
the Trust Agreement, and agrees that the obligations assumed by the Fund
pursuant to this Agreement shall be limited in all cases to the Fund and its
assets, and the Adviser shall not seek satisfaction of any such obligations from
the Shareholders or any Shareholder of the Fund. In addition, the Adviser shall
not seek satisfaction of any such obligations from the trustees or officers of
the Fund or any individual trustee or officer.
17. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provisions 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. This Agreement shall be construed in accordance with
applicable federal law and (except as to paragraph 16 hereof which shall be
construed in accordance with the laws of the Commonwealth of Massachusetts) the
laws of the State of Illinois, and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, subject to
paragraph 12 hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE OBERWEIS FUNDS
By:____________________________
Its:_______________________
Attest:
Its:_____________________
OBERWEIS ASSET MANAGEMENT, INC.
By:____________________________
Its:_______________________
Attest:
Its:_____________________
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