INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT, made this 8th day of
September, 1986, by and between Addison Capital Shares, Inc., a Maryland
corporation (the "Fund"), and Addison Capital Management Company, a Pennsylvania
corporation (the "Adviser").
WHEREAS, the Fund is registered as an open-end, diversified
investment company under the Investment Company Act pf 1940 (the "1940 Act") and
has registered its shares of common stock for sale to the public under the
Securities Act of 1933 and various state securities laws; and
WHEREAS, the Fund wishes to retain the Adviser to provide
investment advisory services to the Fund; and
WHEREAS, the Adviser is willing to furnish such services on
the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, and intending to be legally bound, the Fund and the
Adviser agree as follows:
1. The Fund shall at all times keep the Adviser fully informed
with regard to the securities owned by it, its funds available, or to become
available, for investment, and generally as to the condition of its affairs. It
shall furnish the Adviser with such other documents and information with regard
to its affairs as the Adviser may from time to time reasonably request.
2. (a) Subject to the direction and control of the Fund's
Board of Directors, the Adviser shall regularly provide the Fund with investment
research, advice,
- 1 -
management and supervision and shall furnish a continuous investment program for
the Fund's portfolio of securities consistent with the Fund's investment goals
and policies. The Adviser shall determine from time to time what securities will
be purchased, retained or sold by the Fund, and shall implement those decisions,
all subject to the provisions of the Fund's Articles of Incorporation and
By-laws, the 1940 Act, the applicable rules and regulations of the Securities
and Exchange Commission, and other applicable federal and state laws, as well as
the investment goals and policies of the Fund.
(b) The Adviser will place orders pursuant to its
investment determinations for the Fund either directly with the issuer or with
any broker or dealer. In placing orders with brokers and dealers the Adviser
shall use its best efforts to obtain for the Fund the best execution available.
In using its best efforts to obtain the best execution available, the Adviser,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Board of Directors of the
Fund 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 the Fund to pay a broker or dealer that provides
brokerage and research services to the Adviser an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in
- 2 -
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 and to other clients of the Adviser as
to which the Adviser exercises investment discretion. The Fund hereby authorizes
any entity or person associated with the Adviser which is a member of a national
securities exchange to effect any transaction on any such exchange for the
account of the Fund which is permitted by Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Fund hereby
consents to the retention of compensation for such transactions in accordance
with Rule 11a2-2(T)(2)(iv).
3. (a) The Adviser, at its expense, shall supply the Board of
Directors and officers of the Fund with all statistical information and reports
reasonably required by them and reasonably available to the Adviser. The Adviser
shall maintain and preserve all books and records with respect to the Fund's
securities and transactions in accordance with all applicable federal and state
laws and regulations. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Adviser agrees that all records which it maintains for the
Fund are the property of the Fund and further agrees to surrender promptly to
the Fund any of such records upon the Fund's request. The Adviser further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
(b) Other than as herein specifically indicated, the
Adviser shall not be responsible for the Fund's expenses. Specifically, the
Adviser will not be responsible for any of the following expenses of the Fund,
which expenses shall be the responsibility of the Fund: legal expenses;
interest, taxes, governmental fees or membership dues; brokerage commissions or
- 3 -
charges, if any; fees of custodians, transfer agents, registrars or other
agents; expense of preparing share certificates; expenses relating to the
redemption or repurchase of the Fund's shares; expenses or registering and
qualifying Fund shares for sale under applicable federal and state law; expenses
of preparing, setting in print, printing and distributing prospectuses, reports,
notices and dividends to Fund stockholders; costs of stationary; costs of
stockholders and other meetings of the Fund; traveling expenses of officers,
directors and employees of the Fund, if any; and the Fund's premiums on any
fidelity bond and other insurance covering the Fund and its officers and
directors. The Adviser shall, however, be responsible for all expenses incurred
by it in connection with its activities under this Agreement other than the cost
of securities (including brokerage commissions if any) purchased for the Fund.
4. No director, officer or employee of the Fund shall receive
from the Fund any salary or other compensation as such director, officer or
employee while he is at the same time a director, officer or employee of the
Adviser or any affiliated company of the Adviser. This paragraph shall not apply
to directors, executive committee members, consultants and other persons who are
not regular members of the Adviser's or any affiliated company's staff.
5. (a) As compensation for the services performed by the
Adviser, including the services of any consultants retained by the Adviser, the
Fund shall pay the Adviser, as promptly as possible after the last day of each
month, a fee, calculated daily, of 0.75% annually of the Fund's first $100
million in average daily net assets; 0.50% annually of average daily net assets
in excess of $100 million but less than $250 million, and 0.25% annually of
average daily net assets in excess of $250 million. The first payment of the fee
shall be made as promptly as possible at the end of the month next succeeding
the effective date of this
- 4 -
Agreement, and shall constitute a full payment of the fee due the Adviser of all
services prior to that date. If this Agreement is terminated as of any date not
the last day of a month, such fee shall be paid as promptly as possible after
such date of termination, shall be based on the average daily net assets of the
Fund in that period from the beginning of such month to such date of
termination, and shall be that proportion of such average daily net assets as
the number of business days in such period bears to the number of business days
in such month.
(b) The average daily net assets of the Fund shall in
all cases be based only on business days and be computed as of the time of the
regular close of business of the New York Stock Exchange, or such other time as
may be determined by the Board of Directors of the Fund.
(c) If the expenses borne by the Fund in any fiscal
year exceed the applicable expense limitations imposed by the securities
regulations of any state in which Fund shares are registered or qualified for
sale to the public, the Adviser will reimburse the Fund for its pro rate share
of the excess up to the amount of the Fee payable to it during the fiscal year
pursuant to subparagraph (a) above, provided however that no reimbursement shall
be due unless Xxxxxx Xxxxxxxxxx Xxxxx Inc. ("Janney") shall have waived the
entire amount of the fee due to it for such year under the Service Agreement
dated the date hereof between the Fund and Janney. The Adviser's "pro rata share
of the excess" shall mean the percentage reduction of the Adviser's fee that is
equal, on a percentage basis, to a reduction of Janney's Distribution Fee due
for such year under, and as defined in, the Underwriting Agreement between
Janney and the Fund dated the date hereof, such that the sum, in dollars, of
both reductions equals, in aggregate, the total excess.
- 5 -
(d) Each payment due under this Section 5 shall be
accompanied by a report of the Fund prepared either by the Fund or by a
reputable firm of independent accountants which shall show the amount properly
payable to the Adviser under this Agreement and detailed computation thereof.
6. The Adviser assumes no responsibility under this Agreement
other than to render the services called for hereunder, in good faith, and shall
not be responsible for any action of the Board of Directors of the Fund in
following or declining to follow any advice or recommendations of the Adviser;
provided, that nothing in this Agreement shall protect the Adviser against any
liability to the Fund or its stockholders to which it would otherwise be subject
by reason of 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 hereunder.
7. Nothing in this Agreement shall limit or restrict the right
of any director, officer, or employee of the Adviser who may also be a director,
officer, or employee of the Fund, to engage in any other business or to devote
his time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature, or to limit or
restrict the right of the Adviser to engage in any other business or to render
services of any kind, including investment advisory and management services, to
any other corporation, firm, individual or association.
8. As used in this Agreement, the terms "securities", and "net
assets", shall have the meanings ascribed to them in the Articles of
Incorporation of the Fund; and the terms "assignment", "interested person", and
"majority of the outstanding voting securities" shall have
- 6 -
the meanings given to them by Section 2(a) of the 1940 Act, subject to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation or order.
9. Subject to the provisions of paragraph 10 below, this
Agreement will remain in effect for two years from the date of its execution and
from year to year thereafter, provided that the Adviser does not notify the Fund
in writing at least sixty (60) days prior to the expiration date in any year
that it does not wish continuance of the Agreement for an additional year, and
provided further that such continuance is specifically approved at least
annually (a) by the vote of a majority of the directors of the Fund who are not
parties to this Agreement or interested persons of such parties, cast in person
at a meeting called for that purpose, and (b) vote of the holders of a majority
of the outstanding voting securities of the Fund or by majority vote of the
Fund's Board of Directors.
10. This Agreement shall terminate automatically in the event
of its assignment by the Adviser and shall not be assignable by the Fund without
the consent of the Adviser. This agreement may also be terminated at any time,
without the payment of any penalty, by the Board of Directors of the Fund or by
vote of a majority of the outstanding voting securities of the Fund by sixty
(60) days' written notice addressed to the Adviser at its principal place of
business.
11. In the event this Agreement is terminated by either party
or upon written notice from the Adviser at any time, the Fund hereby agrees that
it will eliminate from its corporate name any references to the name of
"Addison". The Fund shall have the non-exclusive use of the name "Addison" in
whole or in part so long as this Agreement is effective of until such notice is
given.
- 7 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized.
(SEAL) ADDISON CAPITAL SHARES, INC.
Attest:
/s/ Xxxxxxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxxxx
---------------------------- -------------------------
Secretary Treasurer
(SEAL) ADDISON CAPITAL MANAGEMENT
COMPANY
Attest:
/s/ Xxxxxxxxx Xxxxxxx By: /s/ Xxx Xxxxxx
---------------------------- -------------------------
Secretary President
- 8 -
