INVESTMENT SUB-ADVISORY AGREEMENT
---------------------------------
AGREEMENT dated as of March 21, 2003, among ▇▇▇ ▇▇▇▇▇ Research
Funds, a Delaware statutory trust (the "Trust"), on behalf of its series, ▇▇▇
▇▇▇▇▇ Research Asset Allocation Fund (the "Fund"), Gabelli Funds LLC, a New York
limited liability corporation (the "Advisor"), and ▇▇▇ ▇▇▇▇▇ Research, Inc., a
Florida corporation (the "Sub-Advisor").
WHEREAS, the Advisor has agreed to furnish investment advisory
services to the Trust, an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisor wishes to retain the Sub-Advisor to
provide it with certain sub-advisory services as described below in connection
with Advisor's advisory activities on behalf of the Fund;
WHEREAS, the advisory agreement between the Advisor and the
Trust dated March 21, 2003 (such Agreement or the most recent successor
agreement between such parties relating to advisory services to the Trust and
its series is referred to herein as the "Advisory Agreement") contemplates that
the Advisor may sub-contract investment advisory services with respect to the
Trust and its series to one or more sub-advisors pursuant to sub-advisory
agreements agreeable to the Trust and approved in accordance with the provisions
of the 1940 Act applicable thereto; and
WHEREAS, this Agreement has been approved by the Trust's Board
of Trustees and the sole initial shareholder of the Fund in accordance with the
provisions of the 1940 Act, and the Sub-Advisor is willing to furnish such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and between the parties
hereto as follows:
1. APPOINTMENT. The Advisor hereby appoints the Sub-Advisor to
act as sub-advisor with respect to the Fund and the Sub-Advisor accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. SERVICES OF THE SUB-ADVISOR. (a) Subject to the succeeding
provisions of this Agreement, the oversight and supervision of the Advisor and
the direction and control of the Trust's Board of Trustees, the Sub-Advisor will
perform certain of the day-to-day operations of the Fund which may include one
or more of
the following services at the request of the Advisor: (i) acting as investment
advisor for and managing the investment and reinvestment of those assets of the
Fund as the Advisor may from time to time request and in connection therewith
have discretion in purchasing and selling assets for the Fund in accordance with
the terms hereof; (ii) arranging, subject to the provisions of Section 3 hereof,
for the purchase and sale of assets held in the investment portfolio of the
Fund; (iii) providing investment research and credit analysis concerning the
Fund's investments; (iv) assisting the Advisor in determining what portion of
the Fund's assets will be invested in cash, cash equivalents and money market
instruments; (v) placing orders for all purchases and sales of such investments
made for the Fund, and (vi) maintaining those books and records with respect to
the Fund's portfolio transactions as are required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) of Rule 31a-1 (as modified, amended or reclassified from
time to time) under the 1940 Act and the rules and regulations of the Securities
and Exchange Commission (the "SEC") promulgated under the 1940 Act (the "1940
Act Rules").
(1) The Sub-Advisor will keep the Trust and the Advisor
informed of developments materially affecting the Fund and shall, on its own
initiative, furnish to the Trust from time to time whatever information the
Sub-Advisor believes appropriate for this purpose.
(2) The Sub-Advisor will periodically communicate to the
Advisor, at such times as the Advisor may direct, information concerning the
purchase and sale of assets for the Fund, including: (i) the name of the issuer,
(ii) the amount of the purchase or sale, (iii) the name of the broker or dealer,
if any, through which the purchase or sale is effected, (iv) the CUSIP number of
the instrument, if any, and (v) such other information as the Advisor may
reasonably require for purposes of the Advisor and other service providers
fulfilling their obligations to the Trust under their agreements with the Trust
and the Trust fulfilling its obligations under the 1940 Act, the 1940 Act Rules
and various policies and procedures adopted by the Trust and communicated to the
Sub-Advisor by the Trust.
3. COVENANTS OF THE SUB-ADVISOR. In the performance of its
duties under this Agreement, the Sub-Advisor covenants to the Advisor and the
Trust that it shall:
(1) at all times conform to, and act in accordance with, any
requirements imposed by: (i) the provisions of the 1940 Act, the 1940 Act Rules
and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
all applicable Rules and Regulations of the SEC promulgated thereunder (the
"Advisors
2
Act Rules"); (ii) any other applicable provision of law; (iii) the provisions of
the Agreement and Declaration of Trust and the By-Laws of the Trust, as such
documents are amended from time to time (upon notification of such amendment);
(iv) the investment objectives, policies and restrictions of the Fund (as
currently in effect and as they may be amended or supplemented from time to
time) as stated in the Trust's or the Fund's Prospectus and Statement of
Additional Information and the resolutions of the Trust's Board of Trustees
(upon notification of such amendment or supplement); and (v) any policies and
determinations of the Board of Trustees of the Trust (upon notification of such
policy or determination). The Trust agrees to provide written copies to the
Sub-Advisor of documents (and any amendments thereto) referred to in Section
3(a)(iii) to (a)(v) above;
(2) keep the Advisor fully informed as to the composition of
the Fund's assets under the Sub-Advisor's management;
(3) performing its duties hereunder so that (i) the portion of
the Fund managed by the Sub-Advisor meets the income and asset diversification
requirements of Section 851 of the Internal Revenue Code of 1986, as amended
(the "Code), as if such portion were the entire Fund, and (ii) if the Advisor
provides the Sub-Advisor with the necessary information regarding all assets of
the Fund not managed by the Sub-Adviser within 10 days after the end of each
fiscal quarter of the Fund, the Fund meets the income and asset diversification
requirements of Section 851 of the Code;
(4) place orders for the purchase or sale of assets by the
Trust either directly with the issuer or with any broker or dealer. Subject to
the other provisions of this paragraph, in placing orders with brokers and
dealers, the Sub-Advisor will attempt to obtain the best price and the most
favorable execution of its orders. In placing orders with brokers or dealers,
the Sub-Advisor will consider the experience and skill of the firm's securities
traders as well as the firm's financial responsibility and administrative
efficiency. Consistent with the foregoing obligations, and subject to any other
instructions from the Trust or the Advisor, the Sub-Advisor may select brokers
on the basis of the research, statistical and pricing services they provide to
the Trust, the Fund and other clients of the Advisor or the Sub-Advisor.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Sub-Advisor
hereunder. A commission paid to such brokers may be higher than that which
another qualified broker would have charged for effecting the same transaction,
provided that the Sub-Advisor determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Sub-
3
Advisor to the Trust, the Fund and the Sub-Advisor's other clients and that the
total commissions paid by the Fund will be reasonable in relation to the
benefits to the Fund over the long-term. In addition, the Sub-Advisor, subject
to the approval of the Trust's Board of Trustees, 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 Advisor or the Sub-Advisor), provided that the
Sub-Advisor believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified firms. On occasions when
the Sub-Advisor deems the purchase or sale of a security to be in the best
interest of the Fund as well as other clients of the Sub-Advisor, it may
allocate such transactions in the manner it considers to be the most equitable
and consistent with its fiduciary obligation to the Fund and to such other
clients. In no instance, however, will the Fund's securities be purchased from
or sold to the Advisor, the Sub-Advisor or any affiliated person thereof, except
to the extent permitted by the SEC or by applicable law;
(5) vote all proxies solicited by or with respect to the
issuers of securities in which assets of the Fund allocated to Sub-Advisor are
invested consistent with the Sub-Advisor's proxy voting guidelines as approved
by the Board based upon the best interests of the Fund. The Sub-Advisor will
maintain appropriate records detailing its voting of proxies on behalf of the
Fund and (1) will provide to the Trust at least quarterly (and more often to the
extent required by applicable law) a report setting forth the proposals since
the prior report on which the Fund's assets over which the Sub-Advisor had
voting power were entitled to vote and how the Sub-Adviser exercised such voting
power, including the name of the corresponding issuers, and (2) will comply with
the 1940 Act and the 1940 Act Rules with respect to voting of proxies by the
Fund;
(6) if requested by the Advisor, provide the Advisor, no later
than the 45th day following the end of each of the Fund's semi-annual fiscal
period and fiscal year, with a letter to shareholders (to be subject to review,
approval and editing by the Advisor and, if so determined, incorporated into any
report by the Advisor);
(7) provide reports to the Trust's Board of Trustees for
consideration at meetings of the Board on the Sub-Advisor's investment program
for the Fund and the issuers and securities represented in the Fund's portfolio
managed by the Sub-Advisor, and will furnish the Advisor or the Trust's Board of
Trustees with such periodic and special reports and attend such meetings as the
Trustees or the Advisor may reasonably request;
4
(8) cooperate with the Fund's independent public accountants
and take all reasonable action in the performance of services and obligations
under this Agreement to assure that the information needed by such accountants
and that is not otherwise available from the Fund or its agents is made
available to them for the expression of their opinion without any qualification
as to the scope of their examination, including, but not limited to, their
opinion included in the Trust's or the Fund's annual report under the 1940 Act;
(9) promptly notify the Advisor of (1) any financial or other
condition that will or is likely to impair the Sub-Advisor's ability to fulfill
its commitment under this Agreement, and (2) any reduction, non-renewal or
restrictive modification to the Sub-Advisor's fidelity bond, errors and
omissions or other similar insurance policies and any claims or payments
thereunder;
(10) use reasonable compliance techniques as the Advisor or
the Board of Trustees of the Trust may adopt, including any written compliance
procedures;
(11) maintain disclosure controls and procedures reasonably
designed to ensure that any information provided to the Trust for inclusion in
any filings made with the SEC or delivered to shareholders is materially
accurate and complete and otherwise complies with applicable disclosure
requirements;
(12) furnish to the Advisor any information in the possession
of the Sub-Advisor that is required to be filed by the Advisor or the Trust with
the SEC or sent to shareholders under the 1940 Act, the 1940 Act Rules, the
Advisors Act or the Advisors Act Rules or any exemptive or other relief that the
Advisor or the Trust obtains from the SEC;
(13) immediately notify the Advisor of any inquiry or
proceeding by any regulatory or self regulatory body or any judicial or
arbitration proceeding by any person relating to the Sub-Advisor or its
affiliates that may adversely affect the ability of the Sub-Advisor, or its
relevant employees, to provide services in accordance with the terms hereof or
that relate to the Fund or the Sub-Advisor; (1)
(14) immediately notify the Advisor as to any change in the
portfolio manager, team or committee for the Fund; and
5
(15) notify the Advisor of any material change in the
ownership of the Sub-Advisor or any other significant changes to the
Sub-Advisor's management structure within a reasonable time following such
change.
4. COVENANTS OF THE ADVISOR. In the performance of its duties under
this Agreement, the Advisor covenants to the Sub-Advisor that it shall:
(1) keep the Sub-Advisor fully advised of the Fund's
investment objectives, and any modifications and changes thereto, as well as any
specific investment restrictions or limitations by sending the Sub-Advisor
copies of each registration statement;
(2) furnish the Sub-Advisor with a copy of any financial
statement or report prepared for the Fund by its independent public accountants,
and with copies of any financial statements or reports made by the Fund to
shareholders or to any governmental body or securities exchange and to inform
the Sub-Advisor of the results of any audits or examinations by regulatory
authorities pertaining to the Fund; and
(3) furnish the Sub-Advisor with any further materials or
information which the Sub-Advisor may reasonably request to enable it to perform
its functions under this Agreement.
5. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall prevent
the Sub-Advisor or any partner, officer, employee or other affiliate thereof
from acting as investment advisor for any other person, firm or corporation, or
from engaging in any other lawful activity, and shall not in any way limit or
restrict the Sub-Advisor or any of its partners, officers, employees or agents
from buying, selling or trading any securities for its or their own accounts or
for the accounts of others for whom it or they may be acting; provided, however,
that the Sub-Advisor will undertake no activities which, in its reasonable good
faith judgment, will adversely affect the performance of its obligations under
this Agreement.
6. DISCLOSURE ABOUT SUB-ADVISOR. The Sub-Advisor has reviewed the
Registration Statement for the Trust in the form declared effective by the SEC
that contains disclosure about the Sub-Advisor, and represents and warrants
that, with respect to the disclosure about the Sub-Advisor or information
describing the Sub-Advisor and provided by or approved in writing by the
Sub-Advisor, such Registration Statement contains, as of the date of such
Registration Statement and the date hereof, no untrue statement of any material
fact and does not omit any statement
6
of a material fact which was required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading. If at any time such disclosure or information becomes
inaccurate in any material respect, the Sub-Advisor will promptly provide
corrective disclosure to the Advisor and the Trust. The Sub-Advisor further
represents and warrants that it is a duly registered investment adviser under
the Advisers Act and will maintain such registration so long as this Agreement
remains in effect. The Sub-Advisor will provide or offer to provide the Advisor
and the Trust with a copy of the Sub-Advisor's Form ADV, from time to time if
and when it is amended.
7. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Advisor 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 such records upon the Trust's request;
provided that the Sub-Advisor may retain copies of such records. The Sub-Advisor
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
(to the extent such books and records are not maintained by the Advisor or the
Trust's custodian, its transfer agent or shareholder servicing agent).
8. AGENCY CROSS TRANSACTIONS. From time to time, the Sub-Advisor or
brokers or dealers affiliated with it may find themselves in a position to buy
for certain of their brokerage clients (each an "Account") securities which the
Sub-Advisor's investment advisory clients wish to sell, and to sell for certain
of their brokerage clients securities which advisory clients wish to buy. Where
one of the parties is an advisory client, the Sub-Advisor or the affiliated
broker or dealer cannot participate in this type of transaction (known as an
agency cross transaction) on behalf of an advisory client and retain commissions
from both parties to the transaction without the advisory client's consent. By
execution of this Agreement, the Trust authorizes the Sub-Advisor or its
affiliates to participate in agency cross transactions involving an Account on
the one hand, and the Trust or the other. The Sub-Advisor will provide the
Advisor and the Trust with all information about such transactions requested by
either of them from time to time. The Trust may revoke its consent at any time
by written notice to the Sub-Advisor.
9. EXPENSES. During the term of this Agreement, the Sub-Advisor will
bear all costs and expenses of its employees and any overhead incurred by the
Sub-Advisor in connection with its duties hereunder.
7
10. COMPENSATION. The Advisor agrees to pay to the Sub-Advisor and
the Sub-Advisor agrees to accept as full compensation for all services rendered
by the Sub-Advisor as such, a monthly fee in arrears at an annual rate equal to
0.30% of the Fund's average daily net assets managed by the Sub-Advisor on the
first $500 million of the Fund's average daily net assets and 0.35% of the
Fund's average daily net assets managed by the Sub-Adviser in excess of $500
million. For any period less than a month during which this Agreement is in
effect, the fee shall be prorated according to the proportion which such period
bears to a full month of 28, 29, 30 or 31 days, as the case may be.
11. INDEMNIFICATION.
(1) Subject to Section 11(c), the Trust agrees to indemnify
the Sub-Advisor and each of the Sub-Advisor's partners, officers, employees,
agents, associates and controlling persons and the directors, partners, members,
officers, employees and agents thereof (including any individual who serves at
the Sub-Advisor's request as director, officer, partner, member, trustee or the
like of another entity) (each such person being a "Sub-Advisor Indemnitee")
against any liabilities and expenses, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees (all as
provided in accordance with applicable state law) reasonably incurred by such
Sub-Advisor Indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which such Sub-Advisor Indemnitee may be
or may have been involved as a party or otherwise or with which such Sub-Advisor
Indemnitee may be or may have been threatened, as a result of acting in any
capacity set forth herein and by reason of such Sub-Advisor Indemnitee having
acted in any such capacity, except with respect to any matter as to which such
Sub-Advisor Indemnitee shall have been adjudicated not to have acted in good
faith in the reasonable belief that such Sub-Advisor Indemnitee's action was in
the best interest of the Trust and furthermore, in the case of any criminal
proceeding, so long as such Sub-Advisor Indemnitee had no reasonable cause to
believe that the conduct was unlawful; provided, however, that (1) no
Sub-Advisor Indemnitee shall be indemnified hereunder against any liability to
the Advisor or the Trust or any expense of such Sub-Advisor Indemnitee arising
by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence or
(iv) reckless disregard of the duties involved in the conduct of such
Sub-Advisor Indemnitee's position (the conduct referred to in such clauses (i)
through (iv) being sometimes referred to herein as "disabling conduct"), (2) as
to any matter disposed of by settlement or a compromise payment by such
Sub-Advisor Indemnitee, pursuant to
8
a consent decree or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless there has been a determination that
such settlement or compromise is in the best interests of the Trust and that
such Sub-Advisor Indemnitee appears to have acted in good faith in the
reasonable belief that such Sub-Advisor Indemnitee's action was in the best
interest of the Trust and did not involve disabling conduct by such Sub-Advisor
Indemnitee and (3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any Sub-Advisor Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Sub-Advisor Indemnitee was authorized by a majority
of the full Board of Trustees of the Trust.
(2) SUBJECT TO SECTION 11(D) AND NOTWITHSTANDING SECTION 12 OF
THIS AGREEMENT, THE SUB-ADVISOR AGREES TO INDEMNIFY AND HOLD HARMLESS THE TRUST
AND THE ADVISOR AND EACH of the Trust's and Advisor's directors, officers,
employees, agents, associates and controlling persons and the directors,
partners, members, officers, employees and agents thereof (including any
individual who serves at the Trust's or Advisor's request as director, officer,
partner, member, trustee or the like of another entity) (each such person being
a "Trust/Advisor Indemnitee") against any liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees (all as provided in accordance with applicable state
law) reasonably incurred by such Trust/Advisor Indemnitee in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which such
Trust/Advisor Indemnitee may be or may have been involved as a party or
otherwise or with which such Trust/Advisor Indemnitee may be or may have been
threatened, as a result of acting in any capacity set forth herein and by reason
of such Trust/Advisor Indemnitee having acted in any such capacity, except with
respect to any matter as to which such Trust/Advisor Indemnitee shall have been
adjudicated not to have acted in good faith in the reasonable belief that such
Trust/Advisor Indemnitee's action was in the best interest of the Trust and
furthermore, in the case of any criminal proceeding, so long as such
Trust/Advisor Indemnitee had no reasonable cause to believe that the conduct was
unlawful; provided, however, that (1) no Trust/Advisor Indemnitee shall be
indemnified hereunder against any liability to the Sub-Advisor or any expense of
such Trust/Advisor Indemnitee arising by reason of (i) willful misfeasance, (ii)
bad faith, (iii) gross negligence or (iv) reckless disregard of the duties
involved in the conduct of such Trust/Advisor Indemnitee's position (the conduct
referred to in such clauses (i) through (iv) being sometimes referred to herein
as "disabling conduct"), (2) as to any
9
matter disposed of by settlement or a compromise payment by such Trust/Advisor
Indemnitee, pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless there has
been a determination that such settlement or compromise is in the best interests
of the Trust and that such Trust/Advisor Indemnitee appears to have acted in
good faith in the reasonable belief that such Trust/Advisor Indemnitee's action
was in the best interest of the Trust and did not involve disabling conduct by
such Trust/Advisor Indemnitee and (3) with respect to any action, suit or other
proceeding voluntarily prosecuted by any Trust/Advisor Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Trust/Advisor Indemnitee was authorized by the
Sub-Advisor.
(3) The Trust shall not be liable under Paragraph (a) of this
Section 11 with respect to any claim made against a Sub-Advisor Indemnitee
unless such Sub-Advisor Indemnitee shall have notified the Advisor in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Sub-Advisor Indemnitee (or after such Sub-Advisor Indemnitee shall have received
notice of such service on any designated agent), but failure to notify the Trust
of any such claim shall not relieve the Trust from any liability which it may
have to the Sub-Advisor Indemnitee against whom such action is brought except to
the extent the Trust is prejudiced by the failure or delay in giving such
notice. In case any such action is brought against the Sub-Advisor Indemnitee,
the Trust will be entitled to participate, at its own expense, in the defense
thereof or, after notice to the Sub-Advisor Indemnitee, to assume the defense
thereof, with counsel satisfactory to the Sub-Advisor Indemnitee. If the Trust
assumes the defense of any such action and the selection of counsel by the Trust
to represent the Trust and the Sub-Advisor Indemnitee would result in a conflict
of interests and therefore, would not, in the reasonable judgment of the
Sub-Advisor Indemnitee, adequately represent the interests of the Sub-Advisor
Indemnitee, the Trust will, at its own expense, assume the defense with counsel
to the Trust and, also at its own expense, with separate counsel to the
Sub-Advisor Indemnitee, which counsel shall be satisfactory to the Trust and to
the Sub-Advisor Indemnitee. The Sub-Advisor Indemnitee shall bear the fees and
expenses of any additional counsel retained by it, and the Trust shall not be
liable to the Sub-Advisor Indemnitee under this Agreement for any legal or other
expenses subsequently incurred by the Sub-Advisor Indemnitee independently in
connection with the defense thereof other than reasonable costs of
investigation. The Advisor shall not have the right to compromise on or settle
the claim without the prior written consent
10
of the Sub-Advisor Indemnitee if the compromise or settlement results, or may
result in, a finding of wrongdoing on the part of the Sub-Advisor Indemnitee.
(4) The Sub-Advisor shall not be liable under Paragraph (b) of
this Section 11 with respect to any claim made against a Trust/Advisor
Indemnitee unless such Advisor Indemnitee shall have notified the Sub-Advisor in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Trust/Advisor Indemnitee (or after such Trust/Advisor Indemnitee shall have
received notice of such service on any designated agent), but failure to notify
the Sub-Advisor of any such claim shall not relieve the Sub-Advisor from any
liability which it may have to the Trust/Advisor Indemnitee against whom such
action is brought except to the extent the Sub-Advisor is prejudiced by the
failure or delay in giving such notice. In case any such action is brought
against the Trust/Advisor Indemnitee, the Sub-Advisor will be entitled to
participate, at its own expense, in the defense thereof or, after notice to the
Sub/Advisor Indemnitee, to assume the defense thereof, with counsel satisfactory
to the Advisor Indemnitee. If the Sub-Advisor assumes the defense of any such
action and the selection of counsel by the Sub-Advisor to represent both the
Sub-Advisor and the Trust/Advisor Indemnitee would result in a conflict of
interests and therefore, would not, in the reasonable judgment of the
Trust/Advisor Indemnitee, adequately represent the interests of the
Trust/Advisor Indemnitee, the Sub-Advisor will, at its own expense, assume the
defense with counsel to the Sub-Advisor and, also at its own expense, with
separate counsel to the Trust/Advisor Indemnitee, which counsel shall be
satisfactory to the Sub-Advisor and to the Trust/Advisor Indemnitee. The
Trust/Advisor Indemnitee shall bear the fees and expenses of any additional
counsel retained by it, and the Sub-Advisor shall not be liable to the
Trust/Advisor Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by the Trust/Advisor Indemnitee independently in
connection with the defense thereof other than reasonable costs of
investigation. The Sub-Advisor shall not have the right to compromise on or
settle the claim without the prior written consent of the Trust/Advisor
Indemnitee if the compromise or settlement results, or may result in a finding
of wrongdoing on the part of the Trust/Advisor Indemnitee.
12. LIMITATION ON LIABILITY.
(1) The Sub-Advisor will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Advisor or by the
Trust in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a
11
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
duties under this Agreement.
(2) Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as provided in Section
5.1 of Article V of the Declaration of Trust, as amended and restated, this
Agreement is executed by the trustees and/or officers of the Trust, not
individually but as such trustees and/or officers of the Trust, and the
obligations hereunder are not binding upon any of the trustees or shareholders
individually but bind only the estate of the Trust.
13. DURATION AND TERMINATION. This Agreement shall become effective
as of the date hereof and, unless sooner terminated with respect to the Trust as
provided herein, shall continue in effect for a period of two years. Thereafter,
if not terminated, this Agreement shall continue in effect with respect to the
Trust in accordance with the applicable requirements of the 1940 Act and the
1940 Act Rules. Notwithstanding the foregoing, this Agreement may be terminated
by the Trust or the Advisor at any time, without the payment of any penalty,
upon giving the Sub-Advisor 60 days' notice (which notice may be waived by the
Sub-Advisor), provided that such termination by the Trust or the Advisor shall
be directed or approved by the vote of a majority of the Trustees of the Trust
in office at the time or by the vote of the holders of a majority of the voting
securities of the Fund at the time outstanding and entitled to vote, or by the
Sub-Advisor on 60 days' written notice (which notice may be waived by the Trust
and the Advisor), and will terminate automatically upon any termination of the
Advisory Agreement between the Trust (on behalf of the Fund) and the Advisor.
This Agreement will also immediately terminate in the event of its assignment.
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meanings
of such terms in the 1940 Act and the 1940 Act Rules; provided however that no
transfer may be made by the Sub-Advisor under Rule 2a-6 of the 1940 Act without
the approval of a majority of the Trust's Board of Trustees who are not
interested persons of the Trust).
14. CONFIDENTIAL RELATIONSHIP. Information furnished by the Trust
or by one party to another relating to the Trust is confidential and shall not
be disclosed to third parties unless required by law or unless the Trust
otherwise consents. Advisor and Sub-Advisor, on behalf of themselves and their
affiliates and representatives, agree to keep confidential all records and other
information relating to the other party (as the case may be), except after prior
notification to and approval
12
in writing by Advisor or the Sub-Advisor (as the case may be), which approval
shall not be unreasonably withheld, and may not be withheld, where the Advisor
or the Sub-Advisor or any affiliate would be exposed to civil or criminal
contempt proceedings for failure to comply or when requested to divulge such
information by duly constituted authorities. Without limiting the generality of
the foregoing, the Sub-Advisor shall not take any action which shall result in a
violation or breach of the Trust's Privacy Policy as in effect from time to time
and provided to the Sub-Advisor by the Trust.
15. NOTICES. Any notice under this Agreement shall be in writing to
the other party at such address as the other party may designate from time to
time for the receipt of such notice and shall be deemed to be received on the
earlier of the date actually received or on the fourth day after the postmark if
such notice is mailed first class postage prepaid.
16. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to approval by a majority of the Trust's Board of Trustees, including a
majority of the Trust's Board of Trustees who are not interested persons of the
Trust and to approval by shareholders of the Fund if required by the 1940 Act
and the 1940 Act Rules and not excepted by exemptive order of the SEC.
17. 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
provision 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 binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York for contracts to
be performed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.
19. COUNTERPARTS. This Agreement may be executed in counterparts by
the parties hereto, each of which shall constitute an original counterpart, and
all of which, together, shall constitute one Agreement. 1.
13
20. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject matter.
21. SEVERABILITY. Should any part of this Agreement be held invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
22. USE OF NAME. The Sub-Advisor acknowledges that the Trust has a
non-exclusive, revocable license to use the word "▇▇▇ ▇▇▇▇▇" in its name and
that if the Sub-Adviser ceases to be the investment sub-adviser to the Trust,
the Trust will cease using the name as promptly as practicable, making all
reasonable efforts to remove "▇▇▇ ▇▇▇▇▇" from its name.
Where the effect of a requirement of the 1940 Act reflected in or
contemplated by any provision of this Agreement is altered by a rule, regulation
or order of the SEC, whether of special or general application, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
14
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their duly authorized officers designated below as of the day
and year first above written.
GABELLI FUNDS LLC
By: /S/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: CFO
▇▇▇ ▇▇▇▇▇ RESEARCH, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director/CFO
▇▇▇ ▇▇▇▇▇ RESEARCH FUNDS
By: /S/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer