INVESTMENT ADVISORY AGREEMENT
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AGREEMENT made as of the 1st day of October, 1994 by and between OBERWEIS
EMERGING GROWTH FUND, 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 one portfolio, the Emerging
Growth Portfolio (the "Initial Portfolio"), 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 Initial Portfolio 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 Initial Portfolio 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 Initial Portfolio 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.
(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
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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.
(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
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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 computed at an annual rate of .45% of the first $50
million of the daily net assets of the Initial Portfolio, and .4% of the average
daily net assets of such Portfolio over $50 million. 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. 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
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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.
11. Duration and Termination. Provided that agreement is approved by
shareholders of Initial Portfolio within 120 days of effective date, this
Agreement, unless sooner terminated as provided herein, shall remain in force
until September 30, 1996, and thereafter, in the case of the Initial Portfolio
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 Initial Portfolio, 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
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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 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. Arbitration. Any disputes or controversies between the parties to
this Agreement involving the construction or application of any of the terms,
provisions, or conditions of this Agreement shall be submitted to arbitration.
The arbitration shall be conducted in Chicago, Illinois in accordance with the
Rules of the American Arbitration Association. The parties shall each appoint
one person to hear and determine the dispute and, if they are unable to agree,
then the two persons so chosen shall select a third impartial arbitrator whose
decision shall be final and
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conclusive upon both parties. The decision rendered in arbitration shall be
borne by the losing party or in such proportions as the arbitrator shall decide.
18. 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.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
OBERWEIS EMERGING GROWTH FUND
By: /s/ Xxxxx X. Xxxxxxxx
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Its: President
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Attest:
/s/ Xxxxx X. Xxxx
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Its: Secretary
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OBERWEIS ASSET MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Its: Executive Vice President
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Attest:
/s/ Xxxxxx X. Xxxxxxxx
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Its: Vice President
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