INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT (this "Agreement") is made as of July 1,
2003, by and between The Merger Fund VL, a Delaware statutory trust (the "Fund")
and Westchester Capital Management, Inc. (the "Adviser").
WITNESSETH:
WHEREAS, the Fund is an open-end management investment company, registered
as such under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is engaged
in the business of supplying investment advice, investment management and
administrative services; and
WHEREAS, 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 is interested in furnishing said advice and services; and
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
mutually agree as follows:
1. Appointment of Adviser.
The Fund hereby employs the Adviser and the Adviser hereby accepts such
employment, to render investment advice and management 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 Fund's Board of
Trustees.
2. Advisory Services.
The Adviser will regularly provide the Fund with investment research,
advice, and supervision and will furnish continuously an investment program for
the Fund's securities portfolio consistent with the Fund's investment
objectives, policies, and restrictions. The Adviser will determine which
securities shall be purchased for the Fund, which portfolio securities shall be
held or sold by the Fund, and what portion of the Fund's assets shall be held
uninvested, subject always to the provisions of the Fund's Agreement and
Declaration of Trust and By-Laws and of the Investment Company Act of 1940, as
amended (the "Act"), and to the Fund's investment objectives, policies and
restrictions, as each of the same shall be from time to time in effect with
respect to the Fund and subject further to such policies and instructions as the
Trustees of the Fund (or any relevant committee thereof) may establish from time
to time. The Adviser shall advise and assist the officers of the Fund in taking
such steps as are necessary or appropriate to carry out the decisions of its
Trustees and the appropriate committees appointed by such Trustees regarding the
conduct of the business of the Fund.
Brokerage. The Adviser shall place orders for the purchase and sale of
securities either directly with the issuer or with a broker or dealer selected
by the Adviser. In placing the Fund's securities trades, it is recognized that
the Adviser will give primary consideration to securing the most favorable price
and efficient execution, so that the Fund's total cost or proceeds in each
transaction will be the most favorable under all the circumstances. Within the
framework of this policy, the Adviser may consider the financial responsibility,
research and investment information, and other services provided by brokers or
dealers who may effect or be a party to any such transaction or other
transactions to which other clients of the Adviser may be a party.
It is also understood that it is desirable for the Fund that the Adviser
have access to investment and market research and securities and economic
analyses provided by brokers and others. It is also understood that brokers
providing such services may execute brokerage transactions at a higher cost to
the Fund than might result from the allocation of brokerage to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, the purchase and sale of securities for the Fund may be made with
brokers who provide such research and analysis, subject to review by the Fund's
Board of Trustees from time to time with respect to the extent and continuation
of this practice to determine whether the Fund benefits, directly or indirectly,
from such practice. It is understood by both parties that the Adviser may select
broker-dealers for the execution of the Fund's portfolio transactions who
provide research and analysis as the Adviser may lawfully and appropriately use
in its investment management and advisory capacities, whether or not such
research and analysis may also be useful to the Adviser in connection with its
services to other clients.
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Fund as well as of 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. Allocation of Charges and Expenses.
The Adviser will pay the compensation and expenses of all officers and
executive employees of the Fund who are "interested persons" (as defined in the
Act) and will make available, without expense to the Fund, the services of such
of the Adviser's officers, Trustees, and employees as may duly be elected
officers or Trustees of the Fund, subject to their individual consent to serve
and to any limitations imposed by law. The Adviser will pay the Fund's office
rent and will provide investment advisory, research, and statistical facilities
and all clerical services relating to research, statistical and investment work.
The Advisor will not be required to pay any expenses of the Fund other than
those enumerated above in thisParagraph 3. In particular, but without limiting
the generality of the foregoing, the Advisor will not be required to pay (i)
clerical salaries; (ii) fees and expenses incurred by the Fund in connection
with membership in investment company organizations; (iii) brokers' commissions
and other costs in connection with the purchase or sale of securities; (iv)
legal, auditing, or accounting expenses; (v) interest and taxes or governmental
fees; (vi) the fees and expenses of the transfer agent of the Fund; (vii) the
cost of preparing share certificates or any other expenses, of issue, sale,
underwriting, distribution, redemption, or repurchase of shares of the Fund;
(viii) the expenses of and fees for "non-interested persons" of the Fund or the
Adviser within the meaning of the Act; (x) the cost of preparing and
distributing reports and notices to shareholders of the Fund; (xi) all other
expenses incidental to holding meetings of the Fund's shareholders, including
proxy solicitations thereof; (xii) the fees or disbursements of custodians of
the Fund's assets, including expenses incurred in the performance of any
obligations enumerated by the Agreement and Declaration of Trust or By-Laws of
the Fund insofar as they govern agreements with any such custodian; (xiii)
expenses for servicing shareholders accounts; (xiv) insurance premiums for
fidelity and other coverage; (xv) expenses of computing the net asset value of
the shares of the Fund; (xvi) such nonrecurring expenses as may arise, including
actions, suits or proceedings to which the Fund may be a party and the legal
obligation which the Fund may have to indemnify its Trustees and officers with
respect to liabilities which they may incur in their capacity as such; and
(xvii) any expenses of distributing the Fund's shares which may be payable
pursuant to a Plan of Distribution adopted pursuant to Rule 12b-1 under the Act.
4. Compensation of the Adviser.
For all services to be rendered and payments to be made as provided in
Paragraphs 2 and 3 hereof, the Fund will pay the Adviser, a fee, which is
calculated daily and paid monthly, at an annual rate of 1.25% of the Fund's
value of the average daily net assets. The value of the Fund's average daily net
assets shall be determined pursuant to the applicable provisions of the
Declaration of Trust of the Fund. If, pursuant to such provisions, the
determination of net asset value is suspended for any particular business day,
then, for the purposes of this paragraph 4, the value of such net assets of the
Fund as last determined shall be deemed to be the value of such net assets as of
the close of the business on that day. If there is no business day in a month or
if the determination of the net asset value of the Fund's shares has been
suspended pursuant to the Agreement and Declaration Declaration of Trust of the
Fund for a period including such month, the Adviser's compensation payable at
the end of such month shall be computed on the basis of the value of the average
daily net assets of the Fund as last determined by the Trustees of the Fund
(whether during or prior to such month).
5. Avoidance of Inconsistent Position.
In connection of purchases of sales of portfolio securities for the account
of the Fund, neither the Adviser nor any of its directors, officers, or
employees will act as a principal or agent or receive any commission. The
Adviser or its agent shall arrange for the placement of all orders for the
purchase and sale of portfolio securities for the Fund's account with the
issuers or holders of such portfolio securities or with brokers or dealers
selected by the Adviser. In the selection of such brokers or dealers and the
placing of such orders, the Adviser is directed at all times to seek for the
Fund the most favorable execution and net price available, while reserving the
ability to pay such commissions and receive such services as are permitted under
Section 28(e) of the Securities Exchange Act of 1934 or otherwise permitted by
law. Neither the Adviser nor any of its directors or officers will purchase
shares of the Fund for investment purposes at prices not available to the public
at the time of such acquisition. If any occasion should arise in which the
Adviser gives any advice to its clients concerning the shares of the beneficial
interest of the Fund, the Adviser will act solely as investment counsel for such
clients and not in any way on behalf of the Fund. The Adviser's services to the
Fund pursuant to this Agreement are not to be deemed to be exclusive and it is
understood that the Adviser may render investment advice, management, and other
services to others, provided, however, that such services and activities do not,
during the term of this Agreement, interfere in a material manner with the
Adviser's ability to meet all of its obligations with respect to rendering
services hereunder.
6. Conflicts with Fund's Governing Documents and Applicable Laws.
Nothing herein contained shall be deemed to require the Fund to take any
action contrary to the Fund's Agreement and Declaration of Trust, By-Laws, or
any applicable statute or regulation, or to relieve or deprive the Board of
Trustees of the Trust of its responsibility for and control of the conduct of
the affairs of the Fund.
7. Limitation of Liability of Adviser.
The Adviser shall not be liable to the Fund or to any shareholder of the
Fund for any error of judgement or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
a loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Adviser in the performance of its obligations and duties under this
Agreement. Any person, even though also employed by the Adviser, who may be or
become an employee of and paid by the Fund shall be deemed, when acting within
the scope of his employment by the Fund, to be acting in such employment solely
for the Fund and not as an employee or agent of the Adviser.
8. Adviser's Liabilities.
(a) 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 the Fund or to any
shareholder of the 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.
(b) The Fund shall indemnify and hold harmless the Adviser and the
directors, shareholders, officers and employees of the Adviser (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
non-performance 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 gross negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
under this Agreement.
(c) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Fund, or director or officer of the Adviser, from
liability in violation of Sections 17(h) and (i) of the 1940 Act.
9. Duration on Termination of this Agreement.
Unless terminated as specified below, this Agreement shall remain in force
for a period of two years from the date hereof and from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by the vote of a majority of the Fund's Trustees who are not interested persons
of the Adviser or of the Fund cast in person at a meeting called for the purpose
of voting on such approval and by a vote of the Trustees or of a majority of the
outstanding voting securities of the Fund. This Agreement may, on 60 days
written notice, be terminated at any time without the payment of any penalty, by
the Trustees of the Fund, by vote of a majority of the outstanding voting
securities of the Fund, or by the Adviser. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the provisions of this
Agreement, the definitions contained in Section 2(a) of the Act (particularly
the definitions of "interested persons," assignment," and "majority of the
outstanding voting securities"), shall be applied as from time to time amended,
subject, however, to such exemptions as may be granted by any rule, regulation,
order, or no action position of the Securities and Exchange Commission.
10. Amendment of this Agreement.
No provision of this Agreement may be amended, waived, discharged, or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the amendment, waiver, discharge, or termination is
sought and no amendment, waiver, or discharge of this Agreement shall be
effective until approved by vote of the holders of a majority of the Fund's
outstanding voting securities and by the Trustees who are not interested persons
of the Adviser or of the Fund, cast in person at a meeting called for the
purpose of voting on such approval.
11. Miscellaneous.
It is understood and expressly stipulated that neither the holders of
shares of the Fund nor the Trustees shall be personally liable hereunder. 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. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. Governing Law.
This Agreement shall be governed by the laws of the State of New York
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 1940 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 and attested by their duly authorized officers, all on the day and
year first above written.
THE MERGER FUND VL WESTCHESTER CAPITAL MANAGEMENT, INC.
By /s/ Xxxxxx X. Xxxxx By /s/ Xxxxxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx, Vice President Xxxxxxxxx X. Xxxxx, President
