NORTHSTAR RESEARCH ENHANCED INDEX FUND
SUBADVISORY AGREEMENT
AGREEMENT made this 21st day of December, 1998 by and between Northstar
Investment Management Corporation, a Delaware Corporation (hereinafter the
"Adviser"), investment adviser for the Northstar Research Enhanced Index Fund
(hereinafter the "Fund") and X.X. Xxxxxx Investment Management Inc., a Delaware
corporation (hereinafter the "Subadviser").
WHEREAS, the Adviser has been retained by the Fund, an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), to provide investment advisory
services to the Fund pursuant to an Investment Advisory Agreement dated December
1, 1998 (the "Investment Advisory Agreement"); and
WHEREAS, the Fund's Trustees, including a majority of the Trustees who are
not "interested persons," as defined in the 1940 Act, and the Fund's
shareholders have approved the appointment of the Subadviser to perform certain
investment advisory services for the Fund pursuant to this Subadvisory Agreement
with the Adviser and the Subadviser is willing to perform such services for the
Fund;
WHEREAS, the Subadviser is or will be registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act") prior to
performing its services for the Fund under this Agreement;
NOW THEREFORE, in consideration of the promises and mutual convenants
herein contained, it is agreed between the Adviser and the Subadviser as
follows:
1. Appointment. The Adviser hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Subadvisory Agreement. The Subadviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Duties of Subadviser. The Adviser hereby authorizes Subadviser to
manage the investment and reinvestment of cash and investments comprising the
assets of the Fund with power on behalf of and in the name of the Fund at
Subadviser's discretion; subject at all times to the supervision of the Adviser
and the Trustees of the Fund:
(a) to direct the purchase, subscription or other acquisition of
investments and to direct the sale, redemption, and exchange of investments,
subject to the duty to render to the Trustees of the Fund, the Adviser and the
Custodian written reports of the composition of the portfolio of the Fund as
often as the Trustees of the Fund shall reasonably require;
(b) to make all decisions relating to the manner, method and timing of
investment transactions, to select brokers, dealers and other intermediaries by
or through whom such transactions will be effected, and to engage such
consultants, analysts and experts in connection therewith as may be considered
necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Fund, provided that
the Subadviser shall have no other authority to direct the transfer of the
Fund's funds or assets to itself or other persons and shall have no other
authority over the disbursement (as opposed to investment decisions) of funds or
assets nor any custody of any of the Fund's funds or assets; and
(d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder; provided that any specific or
general directions which the Trustees of the Fund, or the Adviser may give to
the Subadviser with regard to any of the foregoing powers shall, unless the
contrary is expressly stated therein, override the general authority given by
this provision to the extent that the Trustees of the Fund may, at any time and
from time to time, direct, either generally or to a limited extent and either
alone or in concert with the Adviser or the Subadviser (provided that such
directions would not cause the Subadviser to violate any fiduciary duties or any
laws with regard to the Subadviser's duties and responsibilities), all or any of
the same as they shall think fit and, in particular, the Adviser shall have the
right to request the Subadviser to place trades through brokers and other agents
of the Adviser's choice, subject to the Subadviser's judgment that such brokers
or agents will
execute such trades on the best overall terms available, taking into
consideration factors the Subadviser deems relevant including, without
limitation, the price of the security, research or other services which render
that broker's services the most appropriate for the Subadviser's needs, the
financial condition and dealing and execution capability of the broker or dealer
and the reasonableness of the commission, if any, for the specific transaction
and on a continuing basis; and provided further that nothing herein shall be
construed as giving the Subadviser power to manage the aforesaid cash and
investments in such a manner as would cause the Fund to be considered a "dealer"
in stocks, securities or commodities for U.S. federal income tax purposes.
The Adviser shall monitor and review the performance of the Subadviser
under this Agreement, including but not limited to the Subadviser's performance
of the duties delineated in subparagraphs (a)-(d) of this provision.
The Subadviser further agrees that, in performing its duties hereunder, it
will
(a) (i) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the "Code") and all
other applicable federal and state laws and regulations, the current Prospectus
and Statement of Additional Information for the Fund supplied to the Subadviser
by the Adviser, and with any applicable procedures adopted by the Trustees in
writing supplied to the Subadviser by the Adviser; (ii) manage the Fund in
accordance with the investment requirements for regulated investment companies
under Subchapter M of the Code and regulations issued thereunder; (iii) direct
the placement of orders pursuant to its investment determinations for the Fund
directly with the issuer, or with any broker or dealer, in accordance with
applicable policies expressed in the Fund's Prospectus and/or Statement of
Additional Information and in accordance with applicable legal requirements.
(b) furnish to the Fund whatever non-proprietary reports the Fund may
reasonably request with respect to the Fund's assets or contemplated strategies.
In addition, the Subadviser will keep the Fund and the Trustees informed of
developments materially affecting the Fund's portfolio and shall, on the
Subadviser's own initiative, furnish to the Fund from time to time whatever
information the Subadviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Northstar
Administrators Corp. (the "Administrator"), the Adviser, and the Fund, promptly
upon their request, such copies of its investment records and ledgers with
respect to the Fund as may be required to assist the Adviser, the Administrator
and the Fund in their compliance with applicable laws and regulations. The
Subadviser will furnish the Trustees with such periodic and special reports
regarding the Fund as they may reasonably request;
(d) immediately notify the Adviser and the Fund in the event that the
Subadviser or any of its affiliates: (i) becomes aware that it is subject to a
statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory Agreement; or (ii) becomes aware
that it is the subject of an administrative proceeding or enforcement action by
the Securities and Exchange Commission ("SEC") or other regulatory authority.
The Subadviser further agrees to notify the Fund and the Adviser immediately of
any material fact known to the Subadviser respecting or relating to the
Subadviser that is not contained in the Fund's Registration Statement, or any
amendment or supplement thereto, but that is required to be disclosed therein,
and of any statement contained therein that becomes untrue in any material
respect. The Fund, Adviser, Administrator, and their Affiliates shall likewise
immediately notify the Subadviser if any of them becomes aware of any regulatory
action of the type described in this subparagraph 2(d).
3. Allocation of Charges and Expenses. The Subadviser shall pay all
expenses associated with the management of its business operations in performing
its responsibilities hereunder, including the cost of its own overhead,
research, compensation and expenses of its directors, officers and employees,
and other internal operating costs; provided, however, that the Subadviser shall
be entitled to reimbursement on a monthly basis by the Adviser of all reasonable
out-of-pocket expenses properly incurred by it in connection with serving as
subadviser to the Fund. For the avoidance of doubt, the Fund shall bear its own
overhead and other internal operating costs (whether incurred directly or by the
Adviser or the Subadviser) including, without limitation:
(a) the costs incurred by the Fund in the preparation and printing of
the Prospectus or any offering literature (including any form of advertisement
or other solicitation materials calculated to lead to investors subscribing for
shares);
(b) all fees and expenses on behalf of the Fund to the Transfer Agent
and the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional advisors to the Fund;
(d) any interest, fee or charge payable on or on account of any
borrowing by the Fund;
(e) fiscal and governmental charges and duties relating to the
purchase, sale, issue or redemption of shares and increases in authorized share
capital of the Fund;
(f) the fees of any stock exchange or over-the-counter market on which
shares of the Fund may from time to time be listed, quoted or dealt in and the
expenses of obtaining any such listing, quotation or permission to deal;
(g) the fees and expenses (if any) payable to Trustees;
(h) brokerage, fiscal or governmental charges or duties in respect of
or in connection with the acquisition, holding or disposal of any of the assets
of the Fund or otherwise in connection with its business;
(i) the expenses of publishing details and prices of shares of the Fund
in newspapers and other publications;
(j) all expenses incurred in the convening of meetings of shareholders
or in the preparation of agreements or other documents relating to the Fund or
in relation to the safe custody of the documents of title of any investments;
(k) all Trustees communication costs; and
(1) all premiums and costs for Fund insurance and blanket fidelity
bonds.
4. Compensation. As compensation for the services provided by the
Subadviser under this Agreement, the Adviser will pay the Subadviser at the end
of each calendar month an advisory fee computed daily at an annual rate equal to
0.20 of 1% of the Fund's average daily net assets. The "average daily net
assets" of the Fund shall mean the average of the values placed on the Fund's
net assets as of 4:00 p.m. (New York time) on each day on which the net asset
value of the Fund is determined consistent with the provisions of Rule 22c-1
under the 1940 Act or, if the Fund lawfully determines the value of its net
assets as of some other time on each business day, as of such other time. The
value of net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Fund's Declaration of Trust and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of regular trading on
the New York Stock Exchange, or as of such other time as the value of the net
assets of the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any month end when the Subadviser's
compensation is payable pursuant to this Section, the Subadviser's compensation
payable at the end of such month shall be computed on the basis of the value of
the net assets of the Fund as last determined (whether during or prior to such
month). If the Fund determines the value of the net assets of its portfolio more
than once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes of
this Section 4.
5. Books and Records. The Subadviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by applicable
laws or regulations. The Subadviser also agrees that records it maintains and
preserves pursuant to Rules 31a-2 under the 1940 Act (excluding trade secrets or
intellectual property rights) in connection with its services hereunder are the
property of the Fund and will be surrendered promptly to the Fund upon its
request and the Subadviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
6. Standard of Care and Limitation of Liability. The Subadviser shall
exercise its best judgment in rendering the services provided by it under this
Subadvisory Agreement. The Subadviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the holders
of the Fund's shares or by the Adviser in connection with the matters to which
this Subadvisory Agreement relates, provided that nothing in this Subadvisory
Agreement shall be deemed to protect or purport to protect the Subadviser
against liability to the Fund or to holders of the Fund's shares or to the
Adviser to which the Subadviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Subadviser's reckless disregard of its obligations
and duties under this Subadvisory Agreement. As used in this Section 6, the term
"Subadviser" shall include any officers, directors, employees or other
affiliates of the Subadviser performing services for the Fund.
7. Services Not Exclusive. The Advisor understands that the Subadviser now
acts, will continue to act and may act in the future as investment advisor to
fiduciary and other managed accounts and as investment advisor to other
investment companies, and, except as may be separately agreed to from time to
time between the Advisor and the Subadviser, the Trust has no objection to the
Subadviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Subadviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with a methodology believed to be equitable to each entity. The
Subadviser agrees to allocate similar opportunities to sell securities. The
Advisor recognizes that, in some cases, this procedure may limit the size of the
position that may be acquired or sold for the Fund. In addition, the Adviser
understands that the persons employed by the Subadviser to assist in the
performance of the Shareholder's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Subadviser or any affiliate of the Subadviser to
engage in and devote time and attention to other business or to render services
of whatever kind or nature.
8. Duration and Termination. This Agreement shall become effective as of
the date of its execution and shall continue in effect for a period of two years
from the date of execution. Thereafter, this Agreement shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Trustees or (ii) a
vote of a "majority" (as defined in the 0000 Xxx) of the Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by a majority of the Fund's Trustees who are not "interested persons"
(as defined in the 0000 Xxx) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on 60 days written notice, by the
Adviser, by the Fund's Trustees, or by vote of holders of a majority of the
Fund's shares. For a period of eighteen months from the date of execution of
this Agreement, the Subadviser may terminate this Agreement, without penalty, on
six months written notice. Thereafter, the Subadviser may terminate this
Agreement, without penalty, on 60 days written notice. This Agreement will
terminate automatically five business days after the Subadviser receives written
notice of the termination of the advisory agreement between the Fund and the
Adviser. This Agreement also will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
9. Amendments. No provision of this Subadvisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties, and no material amendment of this Subadvisory Agreement
shall be effective until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of the Fund, and (ii) a majority of the
Trustees of the Fund, including a majority of Trustees who are not interested
persons of any party to this Subadvisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
10. Indemnification. (a) The Adviser hereby agrees to indemnify the
Subadviser and its affiliates from and against all liabilities, losses,
expenses, reasonable attorneys' fees and
costs (other than attorneys' fees and costs in relation to the preparation of
this Agreement; each party bearing responsibility for its own such costs and
fees) or damages (other than liabilities, losses, expenses, attorneys fees and
costs or damages arising from the Subadviser failing to meet the standard of
care required in Section 6 of this Subadvisory Agreement in the performance by
the Subadviser of, or its failure to perform, the services required hereunder),
arising from the Adviser's (its affiliates and their respective agents and
employees) failure to perform its duties or assume its obligations hereunder, or
from its wrongful actions or omissions, including, but not limited to, any
claims for non-payment of advisory fees; claims asserted or threatened by any
shareholder of the Fund, governmental or regulatory agency, or any other person;
claims arising from any wrongful act by the Fund or any of the Fund's trustees,
officers, employees, or representatives, or by the Adviser, its officers,
employees or representatives, or from any actions by the Fund's distributors or
any representative of the Fund; any action or claim against the Subadviser based
on any alleged untrue statement or misstatement of material fact in any
registration statement, prospectus, shareholder report or other information or
materials covering shares filed or made public by the Fund or any amendment
thereof or supplement thereto, or the failure or alleged failure to state
therein a material fact required to be stated in order that the statements
therein are not misleading, provided that such claim is not based upon
information provided to the Adviser by the Subadviser or approved by the
Subadviser in the manner provided in paragraph 12(b) of this Agreement, or which
facts or information the Subadviser failed to provide or disclose. With respect
to any claim for which the Subadviser shall be entitled to indemnity hereunder,
the Adviser shall assume the reasonable expenses and costs (including any
reasonable attorneys' fees and costs) of the Subadviser of investigating and/or
defending any claim asserted or threatened by any party, subject always to the
Adviser first receiving a written undertaking from the Subadviser to repay any
amounts paid on its behalf in the event and to the extent of any subsequent
determination that the Subadviser was not entitled to indemnification hereunder
in respect of such claim.
(b) The Subadviser hereby agrees to indemnify the Adviser, its
affiliates and the Fund from and against all liabilities, losses, expenses,
reasonable attorneys' fees and costs (other than attorneys' fees and costs in
relation to the preparation of this Agreement; each party bearing responsibility
for its own such costs and fees) or damages (other than liabilities, losses,
expenses, attorneys fees and costs or damages arising from the Adviser's failure
to perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Agreement) arising from Subadviser's (its
affiliates and their respective agents and employees) willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of the
Subadviser's reckless disregard of its obligations and duties under this
Subadvisory Agreement, or arising from failure to act in any action or claim
against the Adviser based on any alleged untrue statement or misstatement of a
material fact made or provided by or with the consent of Subadviser contained in
any registration statement, prospectus, shareholder report or other information
or materials relating to the Fund and shares issued by the Fund, or the failure
or alleged failure to state a material fact therein required to be stated in
order that the statements therein are not misleading, which fact should have
been made or provided by the Subadviser to the Adviser. With respect to any
claim for which the Adviser is entitled to indemnity hereunder, the Subadviser
shall assume the reasonable expenses and costs (including any reasonable
attorneys' fees and costs) of the Adviser of investigating and/or defending any
claim asserted or threatened by any party, subject always to the Subadviser
first receiving a written undertaking from the Adviser to repay any amounts paid
on its behalf in the event and to the extent of any subsequent determination
that the Adviser was not entitled to indemnification hereunder in respect of
such claim.
(c) In the event that the Subadviser or Adviser is or becomes a party
to any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification shall promptly notify the other
party thereof. After becoming notified of the same, the party from whom
indemnification is sought shall be entitled to participate in any such action or
proceeding and shall assume any payment for the full defense thereof with
counsel reasonably satisfactory to the party seeking indemnification. After
properly assuming the defense thereof, the party from whom indemnification is
sought shall not be liable hereunder to the other party for any legal or other
expenses subsequently incurred by such party in connection with the defense
thereof, other than damages, if any, by way of judgment, settlement, or
otherwise pursuant to this provision. The party from whom indemnification is
sought shall not be liable hereunder for any settlement of any action or claim
effected without its written consent, which consent shall not be unreasonably
withheld.
11. Independent Contractor. Subadviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund. Likewise,
the Fund, the
Adviser and their respective affiliates, agents and employees shall not be
deemed agents of the Subadviser and shall have not authority to bind Subadviser.
12. Use of Name. (a) The Fund may, subject to sub-clause (b) below, use
the name, "X.X. Xxxxxx Investment Management Inc." or "X.X. Xxxxxx" for
promotional purposes only for so long as this Agreement (or any extension,
renewal or amendment thereof) continues in force, unless the Subadviser shall
specifically consent in writing to such continued use thereafter. Any permitted
use by the Fund during the term hereof of the name of the Subadviser or X.X.
Xxxxxx shall in no way prevent the Subadviser or any of it shareholders or any
of their successors, from using or permitting the use of such name (whether
singly or in any combination with any other words) for, by or in connection with
an entity or enterprise other than the Fund. The name and right to the name X.X.
Xxxxxx Investment Management Inc. or any derivation of the name X.X. Xxxxxx
shall at all times be owned and be the sole and exclusive property of X.X.
Xxxxxx and its affiliated entities. X.X. Xxxxxx Investment Management Inc., by
entering into this Agreement, is allowing the Fund to use the name X.X. Xxxxxx
Investment Management Inc. and/or X.X. Xxxxxx solely by or on behalf of the
Fund. At the conclusion of this Agreement or in the event of any termination of
this Agreement or if the Subadviser's services are terminated for any reason,
each of the authorized parties and their respective employees, representatives,
affiliates, and associates agree that they shall immediately cease using the
name X.X. Xxxxxx Investment Management Inc. and/or X.X. Xxxxxx of said name for
any purpose whatsoever.
(b) The Adviser and its affiliates shall not publish or distribute, and
shall cause the Fund not to publish or distribute to Fund shareholders,
prospective investors, sales agents or members of the public any disclosure
document, offering literature (including any form of advertisement or other
solicitation materials calculated to lead investors to subscribe for and
purchase shares of the Fund) or other document referring by name to the
Subadviser or any of its affiliates, unless the Subadviser shall have consented
in writing to such references in the form and context in which they appear;
provided however, that where the Fund timely seeks to obtain approval of
disclosure contained in any documents required to be filed by the Fund, and such
approval is not forthcoming on or before the date on which such documents are
required by law to be filed, the Subadviser shall be deemed to have consented to
such disclosure.
13. Miscellaneous.
(a) This Subadvisory Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder. In the event of any litigation in which the Adviser and the
Subadviser are adverse parties and there are no other parties to such
litigation, such action shall be brought in the United States District Court for
the State of New York, located in New York, New York.
(b) The captions of this Subadvisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
14. Notices. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of the
parties as set forth therein during normal business hours, or delivered or sent
by prepaid registered mail, express mail or by facsimile to the parties at such
offices or such other address as may be notified by either party from time to
time. Such notice, instruction or other instrument shall be deemed to have been
served, in the case of a registered letter at the expiration of seventy-two (72)
hours after posting; in the case of express mail, within twenty-four (24) hours
after dispatch; and in the case of facsimile, immediately on dispatch, and if
delivered outside normal business hours it shall be deemed to have been received
at the next time after delivery or transmission when normal business hours
commence. Evidence that the notice, instruction or other instrument was properly
addressed, stamped and put into the post shall be conclusive evidence of
posting.
15. Non-Solicitation. Adviser, its affiliates and their respective agents
(including brokers engaged in marketing and selling shares of the Fund), and
each of their employees and affiliates agree not to knowingly solicit
to invest, or accept or retain as investors, in the Fund any persons or entities
who are clients of or investors in any fund or investment vehicle managed by any
entity owned or affiliated with X.X. Xxxxxx Investment Management Inc.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of December 21, 1998.
Northstar Investment Management Corporation
By: /s/ XXXX X. XXXXXX
-------------------------------------
XXXX X. XXXXXX
Chairman and CEO
X.X. Xxxxxx Investment Management Inc.
By: /s/ XXXXXX X.X. XXXXX
-------------------------------------
Xxxxxx X.X. Xxxxx
Managing Director
