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EXHIBIT 5(b)
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of ___________ ____, 1997, between Capital
Mortgage Management, Inc. ("Manager"), a corporation organized under the laws
of the State of Delaware, and Commerce Bank, N.A., ("Subadviser"), a
national banking association organized under the laws of the United States.
WHEREAS, Manager has entered into a Management Agreement dated
___________ ____, 1997 with the Builders ProLoan Fund, Inc. (the "Fund"), an
open-end investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"); and
WHEREAS, the Manager wishes to retain the Subadviser as subadviser
to furnish certain investment advisory services to the Manager for the
benefit of the Fund in connection with the Manager's management of the Fund,
and the Subadviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. APPOINTMENT. Manager hereby retains the Subadviser as its
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investment subadviser with respect to the Fund for the period and on the
terms set forth in this Agreement. The Subadviser agrees to render the
services to the Manager for the benefit of the Fund herein set forth, for the
compensation herein provided. In the performance of its duties, the
Subadviser will act in the best interests of the Fund and will comply with:
(a) applicable laws and regulations, including, but not limited to, the 1940
Act, (b) the terms of this Agreement, (c) the Fund's Articles of
Incorporation, By-Laws and currently effective registration statement under
the Securities Act of 1933, as amended, and the 1940 Act, and any amendments
thereto, (d) the stated investment objective, policies and restrictions of
the Fund; and (e) such other guidelines as the Board of Directors of the Fund
("Board of Directors") reasonably may establish in writing.
2. DUTIES AS INVESTMENT ADVISER.
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(a) Subject to the supervision of the Board of Directors and the
Manager, the Subadviser will provide a continuous investment program for the
Fund, including investment research and portfolio management with respect to
all securities, investments and cash equivalents in the Fund's portfolio.
The Subadviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund or each Portfolio
for which Subadviser has investment discretion. The Subadviser will exercise
full discretion and act for the Fund in the same manner and with the same
force and effect as the Fund itself might or could do with respect to
purchases, sales, or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions.
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(b) The Subadviser will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or through other
brokers. In the selection of brokers and the placement of orders for the
purchase and sale of portfolio investments for the Fund, the Subadviser shall
use its best efforts to seek on behalf of the Fund the best overall terms
available for any transaction, except to the extent it may be permitted to
pay higher brokerage commissions for brokerage and research services as
described below. In assessing the best overall terms available, the
Subadviser, 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 breadth of the market for the
security, the reputation, experience, execution capability, reasonableness of
the commission, if any, both for the specific transaction and on a continuing
basis, and financial stability of the broker involved and the quality of
service rendered by the broker in other transactions. In evaluating the best
overall terms available, and in selecting the broker to execute a particular
transaction, the Subadviser is expressly authorized to consider the fact that
a broker has furnished statistical, research or other information or services
that enhance the Subadviser's investment research and portfolio management.
It is further understood in accordance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, that the Subadviser may negotiate with and
assign to a broker a commission that may exceed the commission that another
broker would have charged for effecting the transaction if the Subadviser
determines in good faith that the amount of commission charged was reasonable
in relation to the value of brokerage and/or research services (as defined in
Section 28(e)) provided by such broker, viewed in terms either of the Fund or
the Subadviser's overall responsibilities to the Subadviser's discretionary
accounts and other funds. In addition, the Subadviser is authorized to take
into account the sale of shares of the Fund in allocating purchase and sale
orders for portfolio securities to brokers or dealers (including brokers and
dealers that are affiliated with the Manager, Subadviser or the Fund's
distributor), provided that the Subadviser believes that the quality of the
transaction and the commission are comparable to what they would be with
other qualified firms. In no instance will portfolio securities of the Fund
be purchased from or sold to the Subadviser, Manager, the Fund's distributor
or any affiliated person of the foregoing persons. The Fund agrees that any
entity or person associated with the Subadviser which is a member of a
national securities exchange is authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by Section 11(a) of
the Securities Exchange Act of 1934, as amended, and that the Fund consents
to the retention of compensation for such transactions by such entity or
person.
(c) The Subadviser will be responsible for periodically
determining the interest rates and discount points for each Qualified
Mortgage Loan originated by certain banks who participate in the ProLoan
Program (as described in the Fund's current registration statement) pursuant
to the terms of the agreement between the Fund and the banks originating such
Qualified Mortgage Loans, and for determining, in its sole discretion,
whether to grant extensions of interest rate protection to a borrower with
respect to the borrower's Qualified Mortgage Loan.
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(d) The Subadviser will provide the Board of Directors on a
regular basis with economic and investment analyses and reports and make
available to the Board upon request any economic, statistical and investment
services normally available to institutional or other customers of the
Subadviser.
3. COMPENSATION. For the services provided and the expenses
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assumed by the Subadviser pursuant to this Agreement, the Subadviser shall
receive from the Manager an annual subadvisory fee as follows: 0.25% of the
first $50 million of average daily net assets; 0.20% of the next $50 million of
average daily net assets; and 0.165% of average daily net assets in excess of
$100 million. The Subadviser's fees shall be accrued daily and payable
monthly. In no event shall the Fund be responsible for any fees due to the
Subadviser under this Agreement. The Subadviser hereby agrees to waive its
fee such that the fees do not exceed 0.165% of average daily net assets
during a period which will end on December 31, 1998.
4. LIMITATION OF LIABILITY OF THE SUBADVISER. The
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Subadviser shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund or the Manager, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation
for services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Subadviser in the performance of its duties or
from reckless disregard of its obligations and duties under this Agreement.
5. DURATION AND TERMINATION.
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(a) As used in this Agreement, the terms "assignment" and "vote of
a majority of the outstanding voting securities" shall have the meanings
given to them by Section 2(a)(4) and 2(a)(42), respectively, of the 1940 Act.
This Agreement shall terminate automatically in the event of its assignment,
or upon termination of the Investment Advisory Agreement between the Fund and
the Manager with regard to the Fund. This agreement may be terminated at any
time, without the payment of any penalty, (i) with respect to the Fund, by
the Board of Directors of the Fund, or by vote of a majority of the
outstanding voting securities of the Fund, or by the Manager on not less than
thirty nor more than sixty days' written notice addressed to the Subadviser
at its principal place of business; and (ii) by the Subadviser, without the
payment of any penalty, on not less than thirty nor more than sixty days'
written notice addressed to the Manager at the Manager's principal place of
business.
(b) Unless sooner terminated as provided herein, this Agreement
shall remain in full force and effect until _________ ___, 1999, and from
year to year thereafter only so long as its continuance is approved in the
manner required by the 1940 Act, as from time to time amended.
6. SERVICES NOT EXCLUSIVE. The services furnished by the
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Subadviser hereunder are not to be deemed exclusive, and the Subadviser shall
be free to furnish similar services to others so long as its services under
this Agreement are not impaired thereby.
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7. GOVERNING LAW. This Agreement shall be construed in
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accordance with the laws of the State of Missouri without giving effect to
the conflicts of laws principles thereof and the 1940 Act. To the extent
that the applicable laws of the State of Missouri conflict with the
applicable provisions of the 1940 Act, the latter shall control.
8. Notice. Any notice, advice or report to be given pursuant to
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this Agreement shall be delivered or mailed:
To the Subadviser at:
Commerce Bank, N.A. (St. Louis)
0000 Xxxxxxxx Xxxxxxxxx
Xx. Xxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
With a copy to:
W. Xxxxx XxXxxxxx, III, Esq.
Drinker Xxxxxx & Xxxxx
Philadelphia National Bank Building
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
To the Fund or the Manager at:
c/o Capital Mortgage Management, Inc.
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
With a copy to:
Xxxx X. Short, Esq.
Peper, Martin, Xxxxxx, Xxxxxxx and Xxxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xx. Xxxxx, XX 00000-0000
9. COUNTERPARTS. This Agreement may be executed in
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counterparts by the parties hereto, each of which shall constitute an
original counterpart, and all of which, together, shall constitute one
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their duly authorized signatories as of the date and year
first above written.
Attest: CAPITAL MORTGAGE MANAGEMENT, INC.
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By: Xxxx X. Xxxxxxx
Title: President
Attest: COMMERCE BANK, N.A.
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By:
Title:
