THE NORTH COUNTRY FUNDS,
FORM OF INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the ___
day of ________, 2000, by and between THE NORTH COUNTRY FUNDS, a Massachusetts
business trust (the "Trust") on behalf of its series listed on Schedule A hereto
(each a "Fund") and NORTH COUNTRY INVESTMENT ADVISERS, INC., a New York
corporation (the "Adviser").
W I T N E S S E T H :
---------------------
WHEREAS, the Trust is an open-end management investment
company, registered as such under the Investment Company Act of 1940 (the
"Investment Company Act");
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940 and is engaged in the business of
providing investment advice to investment companies; and
WHEREAS, the Trust, on behalf of the Fund, desires to
retain the Adviser to render advice and services to the Fund pursuant to the
terms and provisions of this Agreement, and the Adviser desires to furnish said
advice and services.
NOW, THEREFORE, in consideration of the covenants and the
mutual promises hereinafter set forth, the parties to this Agreement, intending
to be legally bound hereby, mutually agree as follows:
1. Appointment of Adviser. The Trust hereby employs the
Adviser and the Adviser hereby accepts such employment, to render investment
advice and related services with respect to the assets of the Fund for the
period and on the terms set forth in this Agreement, subject to the supervision
and direction of the Board of Trustees.
2. Duties of Adviser.
(a) General Duties. The Adviser shall act as investment
adviser to a Fund and shall supervise investments of the Fund in accordance with
the investment objective, policies and restrictions of the Fund as set forth in
the Fund's governing documents, including, without limitation, the Trust's
Declaration of Trust, as amended, and Bylaws, as amended, the prospectus and
statement of additional information; and such other limitations, policies and
procedures as the Trustees may impose from time to time in writing to the
Adviser. In providing such services, the Adviser shall at all times adhere to
the provisions and restrictions contained in the federal securities laws,
applicable state securities laws, the Internal Revenue Code, the Uniform
Commercial Code and other applicable law.
Without limiting the generality of the foregoing, the
Adviser shall: (i) furnish a Fund with advice and recommendations with respect
to the investment of the Fund's assets and the purchase and sale of portfolio
securities for the Fund, including the taking of such steps as may be necessary
to implement such advice and recommendations (i.e., placing the orders); (ii)
manage and oversee the investments of a Fund, subject to the ultimate
supervision and direction of the Board of Trustees; (iii) vote proxies for a
Fund, file ownership reports under Section 13 of the Securities Exchange Act of
1934 for the Fund, and take other actions on behalf of the Fund; (iv) maintain
the books and records required to be maintained by a Fund except to the extent
arrangements have been made for such books and records to be maintained by the
Administrator, Transfer Agent or other agent of the Fund; (v) furnish reports,
statements and other data on securities, economic conditions and other matters
related to the investment of a Fund's assets which the Board of Trustees or the
officers of the Fund may reasonably request; and (vi) render to the Board of
Trustees such periodic and special reports with respect to a Fund's investment
activities as the Board of Trustees may reasonably request, including at least
one in-person appearance annually before the Board of Trustees.
(b) Brokerage. The Adviser shall be responsible for
decisions to buy and sell securities for a Fund, for broker-dealer election, and
for negotiation of brokerage commission rates, provided that the Adviser shall
not direct orders to an affiliated person of the Adviser without general prior
authorization to use such affiliated broker or dealer from the Board of
Trustees. The Adviser's primary consideration in effecting a securities
transaction will be the best execution at the most favorable price. In selecting
a broker-dealer to execute each particular transaction, the Adviser may take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. The price to the Fund in any transaction may be less favorable than that
available from another broker-dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may
determine, the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused a Fund to pay a broker or dealer that provides (directly or
indirectly) brokerage or research services to the Adviser an amount of
commission for effecting a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund or accounts for which the Adviser has investment discretion. The
Adviser is further authorized to allocate the orders placed by it on behalf of a
Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Fund, the Adviser, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Adviser
shall determine, and the Adviser shall report on such allocations regularly to
the Fund, indicating the broker-dealers to whom such allocations have been made
and the basis therefor. The Adviser is also authorized to consider sales of
shares as a factor in the selection of brokers or dealers to execute portfolio
transactions, subject to the requirements of best price and execution, i.e.,
that such brokers or dealers are able to execute the order promptly and at the
best obtainable securities price.
2
On occasions when the Adviser deems the purchase or sale of
a security to be in the best interest of a Fund as well as of other clients (to
the extent that the Adviser may, in the future, have other clients), the
Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and the most efficient execution.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Adviser in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
3. Representations of the Adviser.
(a) The Adviser shall use its best judgment and efforts
in rendering the advice and services to a Fund as contemplated by this
Agreement.
(b) The Adviser shall maintain all licenses and
registrations necessary to perform its duties hereunder in good order.
(c) The Adviser shall conduct its operations at all
times in conformance with the Investment Advisers Act of 1940, the Investment
Company Act of 1940, and any other applicable state and/or self-regulatory
organization regulations.
4. Independent Contractor. The Adviser shall, for all
purposes herein, be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized to do so, have no authority to act
for or represent the Trust in any way, or in any way be deemed an agent for the
Trust. It is expressly understood and agreed that the services to be rendered by
the Adviser to the Trust under the provisions of this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar or different
services to others so long as its ability to render the services provided for in
this Agreement shall not be impaired thereby.
5. Adviser's Personnel. The Adviser shall, at its own
expense, maintain such staff and employ or retain such personnel and consult
with such other persons as it shall from time to time determine to be necessary
to the performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Adviser shall be
deemed to include persons employed or retained by the Adviser to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Adviser or the Board of Trustees may desire and reasonably request.
3
6. Expenses.
(a) With respect to the operation of a Fund, the Adviser
shall be responsible for (i) providing the personnel, office space and equipment
reasonably necessary for the investment management of the Fund, and (ii) the
costs of any special Board of Trustees meetings or shareholder meetings deemed
by the Board of Trustees at the time any such meeting is called to be convened
for the primary benefit of the Adviser.
(b) A Fund is responsible for and has assumed the
obligation for payment of all of its expenses, other than as stated in
Subparagraph 6(a) above, including but not limited to: investment advisory and
administrative fees and expenses payable to the Adviser or the Fund's
administrator under the appropriate agreements entered into with the Adviser and
the administrator, as the case may be; fees and expenses incurred in connection
with the issuance, registration and transfer of its shares; brokerage and
commission expenses; all expenses of transfer, receipt, safekeeping, servicing
and accounting for the cash, securities and other property of the Fund including
all fees and expenses of its custodian, shareholder services agent and
accounting services agent; interest charges on any borrowings; costs and
expenses of pricing and calculating its daily net asset value and of maintaining
its books of account required under the Investment Company Act; taxes, if any; a
pro rata portion of expenditures in connection with meetings of the Fund's
shareholders and Board of Trustees that are properly payable by the Fund;
salaries and expenses of officers and fees and expenses of members of the Board
of Trustees or members of any advisory board or committee who are not members
of, affiliated with or interested persons of the Adviser; insurance premiums on
property or personnel of the Fund which inure to its benefit, including
liability and fidelity bond insurance; the cost of preparing and printing
reports, proxy statements, prospectuses and statements of additional information
of the Fund or other communications for distribution to existing shareholders;
legal, auditing and accounting fees; trade association dues; fees and expenses
(including legal fees) of registering and maintaining registration of its shares
for sale under federal and applicable state and foreign securities laws; all
expenses of maintaining and servicing shareholder accounts, including all
charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of the Fund; and all other charges
and costs of its operation plus any extraordinary and non-recurring expenses,
except as herein otherwise prescribed.
(c) The Adviser may voluntarily absorb certain Fund
expenses or waive the Adviser's own advisory fee.
4
(d) To the extent the Adviser incurs any costs by
assuming expenses which are an obligation of a Fund as set forth herein, the
Fund shall promptly reimburse the Adviser for such costs and expenses, except to
the extent the Adviser has otherwise agreed to bear such expenses. To the extent
the services for which the Fund is obligated to pay are performed by the
Adviser, the Adviser shall be entitled to recover from the Fund to the extent of
the Adviser's actual costs for providing such services. In determining the
Adviser's actual costs, the Adviser may take into account an allocated portion
of the salaries and overhead of personnel performing such services.
7. Investment Advisory Fee.
(a) A Fund shall pay to the Adviser, and the Adviser
agrees to accept, as full compensation for all investment and advisory services
furnished or provided to the Fund pursuant to this Agreement, an annual
investment advisory fee at the rate set forth in Schedule A to this Agreement.
(b) The investment advisory fee shall be accrued daily
by a Fund and paid to the Adviser on the first business day of the succeeding
month.
(c) The initial fee under this Agreement shall be
payable on the first business day of the first month following the effective
date of this Agreement and shall be prorated as set forth below. If this
Agreement is terminated prior to the end of any month, the fee to the Adviser
shall be prorated for the portion of any month in which this Agreement is in
effect which is not a complete month according to the proportion which the
number of calendar days in the month during which the Agreement is in effect
bears to the number of calendar days in the month, and shall be payable within
ten (10) days after the date of termination.
(d) The fee payable to the Adviser under this Agreement
will be reduced as required under any expense limitation applicable to the Fund.
(e) The Adviser voluntarily may reduce any portion of
the compensation or reimbursement of expenses due to it pursuant to this
Agreement and may agree to make payments to limit the expenses which are the
responsibility of the Fund under this Agreement. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement due
to the Adviser hereunder or to continue future payments. Any such reduction will
be agreed to prior to accrual of the related expense or fee and will be
estimated daily and reconciled and paid on a monthly basis.
(f) Any fee withheld or voluntarily reduced and any Fund
expense absorbed by the Adviser voluntarily or pursuant to an agreed upon
expense cap shall be reimbursed by the Fund to the Adviser, if so requested by
the Adviser, no later than the fifth fiscal year succeeding the fiscal year of
the withholding, reduction or absorption if the aggregate amount actually paid
by a Fund toward the operating expenses for such fiscal year (taking into
account the reimbursement) do not exceed the applicable limitation on Fund
expenses. Such reimbursement may be paid prior to the Fund's payment of current
expenses if so requested by the Adviser even if such practice may require the
Adviser to waive, reduce or absorb current Fund expenses.
5
(g) The Adviser may agree not to require payment of any
portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or reimbursement due
to the Adviser hereunder.
8. No Shorting; No Borrowing. The Adviser agrees that
neither it nor any of its officers or employees shall take any short position in
the shares of a Fund. This prohibition shall not prevent the purchase of such
shares by any of the officers or employees of the Adviser or any trust, pension,
profit-sharing or other benefit plan for such persons or affiliates thereof, at
a price not less than the net asset value thereof at the time of purchase, as
allowed pursuant to rules promulgated under the Investment Company Act. The
Adviser agrees that neither it nor any of its officers or employees shall borrow
from a Fund or pledge or use the Fund's assets in connection with any borrowing
not directly for the Fund's benefit. For this purpose, failure to pay any amount
due and payable to a Fund for a period of more than thirty (30) days shall
constitute a borrowing.
9. Conflicts with a Fund and Trust's Governing Documents
and Applicable Laws. Nothing herein contained shall be deemed to require a Fund
to take any action contrary to the Trust's Declaration of Trust, as amended,
Bylaws, as amended, or any applicable statute or regulation, or to relieve or
deprive the Board of Trustees of its responsibility for and control of the
conduct of the affairs of the Fund. In this connection, the Adviser acknowledges
that the Board of Trustees retains ultimate plenary authority over a Fund and
may take any and all actions necessary and reasonable to protect the interests
of Fund shareholders.
10. Reports and Access. The Adviser agrees to supply such
information to the Funds' administrator and to permit such compliance
inspections by the Funds' administrator as shall be reasonably necessary to
permit the administrator to satisfy its obligations and respond to the
reasonable requests of the Board of Trustees. Any such information supplied by
the Adviser, and any such compliance inspections conducted by the administrator,
shall be supplied or conducted, as the case may be, at a mutually agreed upon
time.
11. Shareholder List. The Adviser shall have access to a
current list of shareholders of a Fund at any time to solicit proxies from such
shareholders on behalf of the Board of Trustees.
12. Adviser's Liabilities and Indemnification.
(a) The Adviser shall have responsibility for the
accuracy of the statements in a Fund's offering materials (including the
prospectus, the statement of additional information, advertising and sales
materials) relating to the Adviser's business and shall have no liability for
information supplied by the administrator or the Trust or another third party
for inclusion therein. The Adviser shall be given a reasonable amount of time
within which to review and comments upon any such offering materials.
6
(b) The Adviser shall be liable to a Fund for any loss
(including brokerage charges) incurred by the Fund as a result of any investment
not in accordance with the Fund's objective and policies, as set forth in the
Fund's offering documents and applicable law.
(c) In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the obligations or duties hereunder
on the part of the Adviser, the Adviser shall not be subject to liability to a
Fund or to any shareholder of a Fund for any act or omission in the course of,
or connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by the Fund.
(d) Each party to this Agreement shall indemnify and
hold harmless the other party and the shareholders, directors, trustees,
officers and employees of the other party (any such person, an "Indemnified
Party") against any loss, liability, claim, damage or expense (including the
reasonable cost of investigating and defending any alleged loss, liability,
claim, damage or expenses and reasonable counsel fees incurred in connection
therewith) arising out of the Indemnified Party's performance or nonperformance
of any duties under this Agreement provided, however, that nothing herein shall
be deemed to protect any Indemnified Party against any liability to which such
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith or negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties under this Agreement.
(e) No provision of this Agreement shall be construed to
protect any member of the Board of Trustees or officer of the Fund, or officer
of the Adviser, from liability in violation of Sections 17(h) and (i) of the
Investment Company Act.
13. Non-Exclusivity; Trading for Adviser's Own Account. The
Adviser may act as investment adviser for any other person, and shall not in any
way be limited or restricted from having, selling or trading any securities for
its or their own accounts or the accounts of others for whom it or they may be
acting, provided, however, that the Adviser expressly represents that it will
undertake no activities which will adversely affect the performance of its
obligations to a Fund under this Agreement; and provided further that the
Adviser will adhere to a code of ethics governing employee trading and trading
for proprietary accounts that conforms to the requirements of the Investment
Company Act and the Investment Advisers Act of 1940 and has been approved by the
Trust's Board of Trustees.
14. Term. This Agreement shall become effective on the
effective date of the Trust's registration statement filed with the Securities
and Exchange Commission and shall remain in effect for a period of two (2)
years, unless sooner terminated as hereinafter provided. This Agreement shall
continue in effect thereafter for additional periods not exceeding one (1) year
so long as such continuation is approved for the Fund at least annually by (i)
the Board of Trustees or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) the vote of a majority of the Trustees of the
Fund who are not parties to this Agreement nor interested persons thereof, cast
in person at a meeting called for the purpose of voting on such approval. The
terms "majority of the outstanding voting securities" and "interested persons"
shall have the meanings as set forth in the Investment Company Act.
7
15. Termination; No Assignment.
(a) This Agreement may be terminated by the Trust with
respect to a Fund at any time without payment of any penalty, by the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund, upon sixty (60) days' written notice to the Adviser, and by the Adviser
upon sixty (60) days' written notice to the Fund. In the event of a termination,
the Adviser shall cooperate in the orderly transfer of the Fund's affairs and,
at the request of the Board of Trustees, transfer any and all books and records
of the Fund maintained by the Adviser on behalf of the Fund.
(b) This Agreement shall terminate automatically in the
event of any transfer or assignment thereof, as defined in the Investment
Company Act.
16. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute or rule, or shall be
otherwise rendered invalid, the remainder of this Agreement shall not be
affected thereby.
17. Captions. The captions in this Agreement are included
for convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts
without giving effect to the conflict of laws principles thereof; provided that
nothing herein shall be construed to preempt, or to be inconsistent with, any
federal law, regulation or rule, including the Investment Company Act and the
Investment Advisers Act of 1940 and any rules and regulations promulgated
thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers, all on the day
and year first above written.
THE NORTH COUNTRY FUNDS, NORTH COUNTRY
INVESTMENT ADVISERS, INC.
By:_________________________________ By:__________________________________
Name: Name:
Title: Title:
8
SCHEDULE A
----------
Annual Fee Rate
---------------
The North Country Equity Growth Fund 0.75% of average daily net assets
The North Country Intermediate Bond Fund 0.50% of average daily net assets
9
