SUBADVISORY AGREEMENT
SURGEONS DIVERSIFIED INVESTMENT FUND
This SUBADVISORY AGREEMENT (the "Agreement") to be effective as of
September 1, 2006, by and among Surgeons Diversified Investment Fund, an Ohio
business trust (the "Trust"), Surgeons Asset Management, LLC, a Delaware limited
liability company (the "Manager"), and Northern Trust Investments, N.A., a
registered investment advisor organized under the laws of the State of Illinois
(the "Subadviser").
WHEREAS, the Trust is an Ohio business trust registered as an open-end
diversified management investment company under the Investment Company Act of
1940 (the "1940 Act"); and
WHEREAS, the Manager is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and
has been retained by the Trust to provide investment services to the Trust;
WHEREAS, the Subadviser also is an investment adviser registered under the
Investment Advisers Act; and
WHEREAS, the Trust and the Manager desire to retain the Subadviser to
furnish it with portfolio management services in connection with the Manager's
investment advisory activities on behalf of the Surgeons Diversified Investment
Fund (the "Fund"), a series of the Trust, and the Subadviser is willing to
furnish such services to the Manager and the Fund;
NOW THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is agreed as follows:
1. EMPLOYMENT OF THE SUBADVISER. In accordance with and subject to the
Investment Management Contract between the Trust and the Manager, the Trust and
the Manager hereby appoint the Subadviser to manage the investment and
reinvestment of the assets of the Fund, subject to the control and direction of
the Manager and the Trust's Board of Trustees, for the period and on the terms
hereinafter set forth. The Subadviser acknowledges that the Trust may appoint
one or more additional subadvisers for the Fund, in accordance with its asset
allocation strategy and that the Manager may adjust the percentage of assets of
the Fund managed by the Subadviser, from time to time in its sole discretion.
The Subadviser hereby accepts such employment and agrees during such period to
render the services and to perform the duties called for by this Agreement for
the compensation herein provided. The Subadviser shall at all times maintain its
registration as an investment adviser under the Investment Advisers Act and
shall otherwise comply in all material respects with all applicable laws and
regulations, both state and federal. The Subadviser shall for all purposes
herein be deemed an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Trust in any way or otherwise be deemed an agent of the
Trust or the Fund.
For purposes of performing its duties hereunder, the Subadviser shall be
entitled to treat the portion of the assets of the Fund managed by the
Subadviser as though such portion constituted the entire Fund, and the
Subadviser shall not be responsible in any way for the compliance of any assets
of the Fund, other than the portion managed by the Subadviser, with the asset
allocation, investment objectives, policies, and restrictions of the Fund or any
directions communicated to the Subadviser with respect to its management of a
portion of the Fund. Subject to the foregoing, the Subadviser is authorized, in
its discretion and without prior consultation with the Manager, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Fund, as the Subadviser shall determine.
Notwithstanding the foregoing provisions of this paragraph, however, (i) the
Subadviser shall, upon and in accordance with written instructions from the
Manager, effect such portfolio transactions for the portion of the Fund managed
by the Subadviser as the Manager shall determine are necessary in order for the
Fund to comply with its asset allocation, investment objectives, policies and
restrictions, and (ii) upon notice to the Subadviser, the Manager may effect
in-kind redemptions with shareholders of the Fund with securities included
within the assets managed by the Subadviser.
2. DUTIES OF THE SUBADVISER. The Subadviser will manage the investment and
undertake the following duties:
a. The Subadviser will manage the investment and reinvestment of certain
assets of the Fund, subject to and in accordance with the asset allocation,
investment objectives, policies and restrictions of the Fund and any directions
which the Manager or the Trust's Board of Trustees may give from time to time
with respect to the Fund. In furtherance of the foregoing, the Subadviser will
make all determinations with respect to the purchase and sale of portfolio
securities for that percentage of assets of the Fund which the Manager has
allocated for the Subadviser to manage, which percentage may fluctuate from time
to time in the sole discretion of the Manager, and the proxy voting of such
portfolio securities. Except for (i) rebalancing transactions made to conform
portfolio holdings to the asset allocation, benchmarks, approved investments, or
other investment objectives, policies or restrictions applicable to the portion
of the Fund managed by the Subadviser, and (ii) transactions directed by the
Manager, the Subadviser will, to the extent reasonably practicable, attempt to
conduct trades for the Fund in a tax-efficient manner.
b. The Subadviser shall provide support to the Manager with respect to the
marketing of the Fund, including but not limited to: (i) permission to use the
Subadviser's name as provided in SECTION 7, (ii) permission to use the past
performance and investment history of the Subadviser as the same is applicable
to the Fund, (iii) access to the individual(s) responsible for day-to-day
management of the Fund for marketing conferences, teleconferences and other
activities involving the promotion of the Fund, subject to the reasonable
request of the Manager, and (iv) permission to use biographical and historical
data of the Subadviser and its individual manager(s).
c. Whenever the Subadviser simultaneously places orders to purchase or sell
the same security on behalf of the Fund and one or more other accounts managed
by the
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Subadviser, such orders will be allocated as to price and amount among all such
accounts in a manner believed by the Subadviser to be equitable to each account
over time.
d. In the event of any reorganization or similar change in the Subadviser,
its investment principals responsible for managing the Fund's investments or
members of its investment (or comparable) committee, the Subadviser shall give
the Manager and the Trust's Board of Trustees written notice of such
reorganization or change within a reasonable time (but not later than 10 days)
after such reorganization or change.
e. The Subadviser will bear its expenses of providing services to the Fund
pursuant to this Agreement except such expenses as are undertaken by the Manager
or the Trust and the cost (including taxes, brokerage commissions and other
transaction costs, if any) of the securities or other investment instruments
purchased or sold for the Fund.
f. The Subadviser will manage the Fund and the investment and reinvestment
of such assets so as to comply with the provisions of the 1940 Act, the current
Prospectus and Statement of Additional Information of the Fund, and with
Subchapter M of the Internal Revenue Code of 1986, as amended.
3. DUTIES OF THE MANAGER.
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a. The Manager shall provide (or cause the Fund's custodian to provide)
timely information to the Subadviser regarding such matters as the composition
of the assets of the Fund managed by the Subadviser, cash requirements and cash
available for investment in such assets, and all other information as may be
reasonably necessary for the Subadviser to perform its responsibilities
hereunder.
b. The Manager has furnished the Subadviser with a copy of its investment
management agreement with the Fund, the prospectus of the Fund and the statement
of additional information of the Fund and it agrees during the continuance of
this Agreement to furnish the Subadviser copies of any revisions or supplements
thereto at, or, if practicable, before the time the revisions or supplements
become effective. The Manager agrees to furnish the Subadviser with copies of
any financial statements or reports made by the Fund to its shareholders, and
any further materials or information that the Subadviser may reasonably request
to enable it to perform its functions under this Agreement.
4. TRADING AND BROKERAGE
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a. Absent instructions from the Manager or the officers of the Fund to the
contrary, the Subadviser shall place orders pursuant to its determinations
either directly with the issuer or with any broker and/or dealer or other person
who deals in the securities in which the Fund is trading. With respect to common
and preferred stocks, in executing portfolio transactions and selecting brokers
or dealers, the Subadviser shall use its best judgment to obtain the best
overall terms available. In assessing the best overall terms available for any
transaction, the Subadviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the
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broker or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the best overall
terms available and in selecting the broker or dealer to execute a particular
transaction, the Subadviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to the Fund and/or other account over which the Subadviser
and/or an affiliate of the Subadviser exercises investment discretion. With
respect to securities other than common and preferred stocks, in placing orders
with brokers, dealers or other persons, the Subadviser shall attempt to obtain
the best net price and execution of its orders, provided that to the extent the
execution and price available from more than one broker, dealer or other such
person are believed to be comparable, the Subadviser may, at its discretion but
subject to applicable law, select the executing broker, dealer or such other
person on the basis of the Subadviser's opinion of the reliability and quality
of such broker, dealer or such other person; broker or dealers selected by the
Subadviser for the purchase and sale of securities or other investment
instruments for the Fund may include brokers or dealers affiliated with the
Subadviser, provided such orders comply with Rules 17e-1 and 10f-3 under the
1940 Act and the Trust's Rule 17e-1 and Rule 10f-3 Procedures, respectively, in
all respects, or any other applicable exemptive rules or orders applicable to
the Subadviser. Notwithstanding the foregoing, the Subadviser will not effect
any transaction with a broker or dealer that is an "affiliated person" (as
defined under the 0000 Xxx) of the Subadviser or the Manager without the prior
approval of the Manager.
b. The Subadviser may, on occasions when it deems the purchase or sale of a
security to be in the best interests of the Fund as well as other fiduciary or
agency accounts managed by the Subadviser, aggregate, to the extent permitted by
applicable laws and regulations, the securities to be sold or purchased in order
to obtain the best overall terms available and execution with respect to common
and preferred stocks and the best net price and execution with respect to other
securities. 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 Subadviser
in the manner it considers to be most fair and equitable over time to the Fund
and to its other accounts.
5. COMPENSATION OF THE SUBADVISER.
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As compensation for the services to be rendered and duties undertaken
hereunder by the Subadviser, the Manager will pay to the Subadviser a quarterly
Subadvisory fee equal to 0.30% per annum of an amount equal to the average daily
net assets of the portion of the Fund managed by the Subadviser, less such net
assets invested in that portion of the Fund that are invested in a money market
fund which itself pays an advisory fee to the Subadviser. The minimum fee to the
Subadviser will be $10,500 per quarter ($42,000 annually).
6. ACTIVITIES OF THE SUBADVISER. It is understood that the Subadviser may
perform investment advisory services for various other clients, including other
investment companies. The Subadviser will report to the Board of Trustees of the
Trust at regular quarterly Board meetings and at such other times as such Board
of Trustees reasonably shall request (i) information regarding any potential
conflicts of interest arising by reason of its continuing provision of advisory
services to the Fund and to its other accounts, and (ii) such other information
as the Board of Trustees shall reasonably request regarding the Fund, the Fund's
performance, the services provided by the Subadviser to the Fund as compared to
its other
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accounts, and the plans of, and the capability of, the Subadviser with respect
to providing future services to the Fund and its other accounts. The Subadviser
agrees to submit to the Trust a statement defining its policies with respect to
the allocation of business among the Fund and its other clients upon execution
of this Agreement and upon any future amendment or change to any such policies.
The Subadviser has supplied to the Manager and the Trust copies of its Form
ADV with all exhibits and attachments thereto and will hereafter supply to the
Manager, promptly upon the preparation thereof, copies of all amendments or
restatements of such document.
The Subadviser has also delivered to the Manager and the Trust copies of
its code of ethics complying with the requirements of Rule 17j-1 under the 1940
Act (the "Code"). The Subadviser shall promptly furnish the Manager and Trust
with all amendments or supplements to its Code at least annually. On a quarterly
basis, the Subadviser shall report to the Manager and the Board on compliance by
the access persons of the Fund with its Code, and provide the Manager and the
Trust, or their respective representatives, such other information with respect
to such compliance as is reasonably requested.
7. USE OF NAMES. The Trust is hereby authorized to disclose the name of the
Subadviser and any individual persons employed by the Subadviser who are deemed
to be portfolio managers of the Fund, and as required under Form N-1A. Neither
the Manager nor the Trust shall use the name of the Subadviser in any
prospectus, sales literature or other material relating to the Manager or the
Trust in any other manner not approved in advance by the Subadviser; provided,
however, that the Subadviser will approve all uses of its name which merely
refer in accurate terms to its appointment hereunder or which are required by
the SEC or a state securities commission; and provided further, that in no event
shall such approval be unreasonably withheld. The Subadviser shall not use the
name of the Manager or the Trust in any material relating to the Subadviser in
any manner not approved in advance by the Manager or the Trust, as the case may
be; provided, however, that the Manager and the Trust shall each approve all
uses of their respective names which merely refer in accurate terms to the
appointment of the Subadviser hereunder or which are required by the SEC or a
state securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
8. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Subadviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
Subadviser 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.
9. LIMITATION OF LIABILITY OF THE SUBADVISER. The Subadviser shall not be
liable for any mistake of judgment or otherwise, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to protect,
the Subadviser against any liability to the Manager, the Trust or to any
shareholder to which the Subadviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of
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its duties hereunder, or by reason of the Subadviser's reckless disregard of its
obligations and duties hereunder. As used in this SECTION 9, the term
"Subadviser" shall include the Subadviser and/or any of its affiliates and the
directors, officers and employees of the Subadviser and/or any of its
affiliates. Under no circumstances shall the Subadviser be liable for any loss
arising out of any act or omission taken by the custodian, another subadviser,
or any other third party who provides services to the Fund, or in respect of any
portion of the Fund's assets not managed by the Subadviser pursuant to this
Agreement.
10. LIMITATION OF TRUST'S LIABILITY. The Subadviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Subadviser agrees that
(i) the Trust's obligations to the Subadviser under this Agreement (or
indirectly under the Investment Management Contract between the Trust and the
Manager) shall be limited in any event to the assets of the Fund and (ii) the
Subadviser shall not seek satisfaction of any such obligation from the holders
of shares of the Fund nor from any Trustee, officer, employee or agent of the
Trust.
11. FORCE MAJEURE. The Subadviser shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Subadviser shall take reasonable steps to minimize
service interruptions but shall have no liability with respect thereto.
12. RENEWAL, TERMINATION AND AMENDMENT.
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a. This Agreement shall become effective on September 1, 2006 and shall
remain in force for a period of two (2) years from such date, and from year to
year thereafter provided that such continuance is specifically approved by the
parties and, in addition, by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Fund or by vote of a
majority of the Trust's Board of Trustees and (ii) by the vote of a majority of
the Trustees who are not parties to this Agreement or interested persons of
either the Manager or the Subadviser, cast in person at a meeting called for the
purpose of voting on such approval.
b. This Agreement may be terminated at any time, without payment of any
penalty, (i) by a vote of the Board of Trustees or by a vote of the majority of
the outstanding voting securities of the Fund, in any such case upon not less
than 60 days' prior written notice to the Subadviser and (ii) by the Subadviser
upon not less than 60 days' prior written notice to the Manager and the Trust.
This Agreement shall terminate automatically in the event of (A) its assignment
or (B) the termination of the Investment Management Contract between the Trust
and the Manager.
c. This Agreement may be amended at any time by the parties hereto, subject
to approval by the Trust's Board of Trustees and, if required by applicable SEC
rules and regulations, a vote of the majority of the outstanding voting
securities of the Fund.
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d. The terms "assignment," "interested persons" and "majority of the
outstanding voting securities" shall have the meaning set forth for such terms
in the 1940 Act.
13. SEVERABILITY. If any provision of this Agreement shall become or shall
be found to be invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
14. NOTICE. Any notices under this Agreement shall be in writing addressed
and delivered personally (or by telecopy) or mailed postage-paid, to the other
party at such address as such other party may designate in accordance with this
paragraph for the receipt of such notice. Until further notice to the other
party, it is agreed that the address of the Trust and that of the Manager for
this purpose shall be 000 X. Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000-0000 and that
the address of the Subadviser shall be 00 X. XxXxxxx, Xxxxxxx, Xxxxxxxx 00000.
15. MISCELLANEOUS. Each party agrees to perform such further actions and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio, the 1940 Act, the Investment Advisers
Act of 1940, and all applicable rules, guidance and exemptive orders issued by
the Securities and Exchange Commission and its staff. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
16. CONFIDENTIALITY. Any information or recommendations supplied by either
the Manager or the Subadviser, that are not otherwise in the public domain or
previously known to the other party in connection with the performance of its
obligations and duties hereunder, including without limitation portfolio
holdings of the Trust, financial information or other information relating to a
party to this Agreement, are to be regarded as confidential ("Confidential
Information") and held in the strictest confidence. Except as may be required by
applicable law or rule as requested by regulatory authorities having
jurisdiction over a party rule or as requested by regulatory authorities having
jurisdiction over a party to this Agreement, Confidential Information may be
used only by the party to which said information has been communicated and such
other persons as that party believes are necessary to carry out the purposes of
this Agreement, the custodian, and such persons as the Manager may designate
with respect to the assets managed by the Subadviser.
17. COUNTERPARTS. This Agreement may be executed 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.
18. REPRESENTATIONS OF THE MANAGER.
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The Manager represents and warrants to the Subadviser as follows:
a. The Manager is and shall remain registered under the Advisers Act; and
b. The Manager and the Trust has duly authorized the execution of this
Agreement by the Manager.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
SURGEONS ASSET SURGEONS DIVERSIFIED
MANAGEMENT, LLC INVESTMENT FUND
By: /s/ Xxx Xxxxxxx By: /s/ Xxxxxxx Xxx
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Name: Xxx Xxxxxxx Name: Xxxxxxx Xxx
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Xxxxxxx X. Xxx, President
Title: Comptroller
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NORTHERN TRUST INVESTMENTS, N.A.
By: /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
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Title: Vice President
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