EXHIBIT (D)(3)
INTERIM INVESTMENT ADVISORY AGREEMENT FOR SELECT VALUE PORTFOLOPRINCIPAL
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PRESERVATION PORTFOLIOS, INC.
INTERIM INVESTMENT ADVISORY AGREEMENT
THIS INTERIM AGREEMENT made as of the 29th day of September, 2000, by and
between PRINCIPAL PRESERVATION PORTFOLIOS, INC., a Maryland corporation ("PPP"),
on behalf of its Select Value Portfolio (the "Fund"), and NORTHPOINTE CAPITAL,
LLC (the "Advisor").
W I T N E S S E T H:
A. The Investment Advisory Agreement (the "Previous Contract") between
PPP and ▇.▇. ▇▇▇▇▇▇▇ and Company ("▇▇▇▇▇▇▇") with regard to the Fund has been
terminated by the Board of Directors of PPP on September 27, 2000;
B. On September 27, 2000, the Board of Directors of PPP, including a
majority of the directors who are not interested persons (as defined in the
Investment Company Act of 1940 (the "Act")) of PPP or the Fund, have duly
approved this Interim Agreement; and
C. This Interim Agreement is entered into in compliance with Rule 15a-4
under the Act.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. IN GENERAL
PPP hereby appoints the Advisor to act as investment advisor for the
Fund, subject to the terms and conditions set forth in this Interim Agreement.
The Advisor agrees to provide professional investment management with respect to
the investment of the assets of the Fund and to supervise and arrange the
purchase and sale of securities held in the portfolio of the Fund and to
generally administer the affairs of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO MANAGEMENT OF
THE FUND
(a) Subject to the succeeding provisions of this section and subject
to the direction and control of the Board of Directors of PPP,
the Advisor shall:
(i) Decide what securities shall be purchased or sold by the
Fund and when; and
(ii) Arrange for the purchase and the sale of securities held in
the portfolio of the Fund by placing purchase and sale
orders for the Fund.
(b) Any purchases or sales of portfolio securities on behalf of the
Fund shall at all times conform to, and be in accordance with,
any requirements imposed by: (1) the provisions of the Act and of
any rules or regulations in force thereunder; (2) any other
applicable provisions of law; (3) the provisions of the Articles
of Incorporation and By-Laws of PPP as amended from time to time;
(4) any policies and determinations of the Board of Directors of
PPP; and (5) the fundamental policies of PPP, as reflected in its
prospectus and statement of additional information (the
"Registration Statement") under the Act, or as amended by the
shareholders of the Fund.
(c) The Advisor shall also administer the affairs of the Fund and, in
connection therewith, shall be responsible for (i) maintaining
the Fund's books and records, (other than financial or accounting
books and records maintained by any accounting services agent and
such records maintained by the Fund's custodian or transfer
agent); (iii) preparing for the Fund (or assisting counsel and/or
auditors in the preparation of) all required tax returns, proxy
statements and reports to the Fund's shareholders and directors
and reports to and other filings with the Securities and Exchange
Commission ("SEC") and other governmental agency (the Fund
agreeing to supply or cause to be supplied to the Advisor all
necessary financial and other information in connection with the
foregoing); (iv) preparing such applications and reports as may
be necessary to register or maintain the Fund's registration
and/or the registration of the shares of the Fund under the
securities or "blue sky" laws of the various states selected by
the Fund's distributor (the Fund agreeing to pay all filing fees
or other similar fees in connection therewith); (v) responding to
all inquiries or other communications of shareholders, if any,
which are directed to the Advisor, or if any such inquiry or
communication is more properly to be responded to by the Fund's
custodian, transfer agent or accounting services agent,
overseeing their response thereto; (vi) overseeing all
relationships between the Fund and its custodian(s), transfer
agent(s) and accounting services agent(s), including the
negotiation of agreements and the supervision of the performance
of such agreements; and (vii) authorizing and directing any of
the Advisor's directors, officers and employees who may be
elected as Directors or officers of PPP to serve in the
capacities in which they are elected. All services to be
furnished by the Advisor under this Interim Agreement may be
furnished through the medium of any such Directors, officers or
employees of the Advisor.
(d) The Advisor shall give the Fund the benefit of its best judgment
and effort in rendering services hereunder. In the absence of
willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties ("disabling conduct")
hereunder on the part of the Advisor (and its officers,
directors, agents, employees, controlling persons, shareholders
and any other person or entity affiliated with the Advisor) the
Advisor shall not be subject to liability to PPP, the Fund or to
any shareholder of the Fund for any act or omission in the course
of, or connected with rendering services hereunder, including
without limitation, any error of judgment or mistake of law or
for any loss suffered by any of them in connection with the
matters to which this Interim Agreement related, except to the
extent specified in Section 36(b) of the Act concerning loss
resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services. Furthermore, the Advisor
shall not be subject to liability to PPP, the Fund or to any
shareholder of the Fund for any act or omission in the course of,
or connected with, ▇▇▇▇▇▇▇ or any other advisors or sub-advisors
rendering services under the terms of the Previous Contract and
any other prior investment advisory agreements ("Prior
Agreements"). Except for such disabling conduct, PPP shall
indemnify the Advisor (and its officers, directors, agents,
employees, controlling persons, shareholders and any other person
or entity affiliated with the Advisor) from any liability arising
from the Advisor's conduct under this Interim Agreement or
▇▇▇▇▇▇▇'▇ or any other advisor's or sub-advisor's conduct under
the terms of the Prior Agreements to the extent permitted by
PPP's Articles of Incorporation, By-Laws and applicable law.
(e) Nothing in this Interim Agreement shall prevent the Advisor or
any affiliated person (as defined in the Act) of the Advisor from
acting as investment advisor or manager and/or principal
underwriter for any other person, firm or corporation and shall
not in any way limit or restrict the advisor or any such
affiliated person from buying, selling or trading any securities
for its or their own accounts or the accounts of others for whom
it or they may be acting, provided, however, that the Advisor
expressly represents that it will undertake no activities which,
in its judgment, will adversely affect the performance of its
obligations to the Fund under this Interim Agreement.
(f) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of PPP's Registration
Statement under the Act or the Securities Act of 1933 except for
information supplied by the Advisor for inclusion therein.
3. BROKER-DEALER RELATIONSHIPS
In connection with its duties set forth in Section 2(a)(ii) of this
Interim Agreement to arrange for the purchase and the sale of securities held by
the Fund by placing purchase and sale orders for the Fund, the Advisor shall
select such broker-dealers ("brokers") as shall, in the Advisor's judgment,
implement the policy of PPP to achieve "best execution," i.e., prompt and
efficient execution at the most favorable securities price. In making such
selection, the Advisor is also authorized to consider whether the broker
provides brokerage and/or research services to the Fund and/or other accounts of
the Advisor. The commissions paid to such brokers may be higher than another
broker would have charged if a good faith determination is made by the Advisor
that the commission is reasonable in relation to the services provided, viewed
in terms of either that particular transaction or the Advisor's overall
responsibilities as to the accounts as to which it exercises investment
discretion. The Advisor shall use its judgment in determining that the amount
of commissions paid are reasonable in relation to the value of brokerage and
research services provided and need not place or attempt to place a specific
dollar value on such services or on the portion of commission rates reflecting
such services. To demonstrate that such determinations were in good faith, and
to show the overall reasonableness of commissions paid, the Advisor shall be
prepared to show that commissions paid (i) were for purposes contemplated by
this Interim Agreement; (ii) provide lawful and appropriate assistance to the
Advisor in the performance of its decision-making responsibilities; and (iii)
were within a reasonable range as compared to the rates charged by qualified
brokers to other institutional investors as such rates may become known from
available information. PPP recognizes that, on any particular transaction, a
higher than usual commission may be paid due to the difficulty of the
transaction in question. The Advisor is also authorized to consider sales of
shares as a factor in the selection of brokers to execute brokerage and
principal transactions, subject to the requirements of "best execution," as
defined above.
It is recognized that the services provided by such brokers may be
useful to the Advisor in connection with the Advisor's services to other
clients. On occasions when the Advisor deems the purchase or sale of a security
to be in the best interests of the Fund as well as other clients of the Advisor,
the Advisor, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of securities so
sold or purchased, as well as the expenses incurred in the transaction, will be
made by the Advisor in the manner the Advisor considers to be the most equitable
and consistent with its fiduciary obligations to the Fund and to such other
clients.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Fund, at the Advisor's
expense, with all office space and facilities, and equipment and clerical
personnel necessary for carrying out its duties under this Interim Agreement.
The Advisor will also pay all compensation of all directors, officers and
employees of PPP who are affiliated persons of the Advisor. All costs and
expenses not expressly assumed by the Advisor under this Interim Agreement shall
be paid by PPP, including, but not limited to (i) interest and taxes; (ii)
brokerage commissions; (iii) insurance premiums; (iv) compensation and expenses
of its directors other than those affiliated with the Advisor; (v) legal and
audit expenses; (vi) fees and expenses of the Fund's custodian, shareholder
servicing or transfer agent and accounting services agent; (vii) expenses
incident to the issuance of its shares, including stock certificates and
issuance of shares on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Fund or its shares; (ix) expenses of preparing, printing and mailing
reports and notices proxy material and prospectuses to shareholders of the Fund;
(x) all other expenses incidental to holding meetings of the Fund's
shareholders; (xi) dues or assessments of or contributions to the Investment
Company Institute or any successor or other industry association; (xii) such
non-recurring expenses as may arise, including litigation affecting PPP and the
legal obligations which PPP may have to indemnify its officers and Directors
with respect thereto; and (xiii) all expenses which PPP or the Fund agrees to
bear in any distribution agreement or in any plan adopted by PPP and/or the Fund
pursuant to Rule 12b-1 under the Act.
5. COMPENSATION OF THE ADVISOR
(a) PPP agrees to pay the Advisor and the Advisor agrees to accept as
full compensation for all services rendered by the Advisor as
such, an annual management fee, payable monthly and computed on
the value of the average daily net asset value of the Fund as
shown on Exhibit A attached hereto. The method of determining
net assets of the Fund for purposes hereof shall be the same as
the method of determining net assets for purposes of establishing
the offering and redemption price of the Fund's shares. If this
Interim Agreement shall be effective for only a portion of a
month, the fee shall be prorated for the portion of such month
during which this Interim Agreement is in effect.
(b) The compensation earned hereunder by the Advisor shall be held in
an interest-bearing escrow account with Firstar Trust Company,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(1) If a majority (as defined in the Act) of the Fund's
outstanding voting securities approve a definitive
investment advisory contract with the Advisor within 150
days following the date on which the Previous Contract
terminated, the amount in the escrow account (including
interest earned) will be paid to the Advisor.
(2) If a majority (as defined in the Act) of the Fund's
outstanding voting securities do not approve a definitive
investment advisory contract with the Advisor within 150
days following the date on which the Previous Contract
terminated, the Advisor will be paid, out of the escrow
account, the lesser of:
(A) Any costs incurred in performing this contract, plus
interest earned on that amount while in escrow; or
(B) The total amount in the escrow account, plus interest
earned.
(c) In the event the expenses of the Fund (including the fees of the
Advisor and amortization of organization expenses but excluding
interest, taxes, brokerage commissions, extraordinary expenses
and sales charges and distribution fees) for any fiscal year
exceed the limits set by applicable regulations of state
securities commissions, the Advisor will reduce its fee by the
amount of such excess. Any such reductions are subject to
readjustment during the year. The payment of the management fee
at the end of any month will be reduced or postponed or, if
necessary, a refund will be made to the Fund so that at any time
will there be any accrued but unpaid liability under this expense
limitation.
6. DURATION AND TERMINATION
(a) This Interim Agreement shall go into effect on the date set forth
on Exhibit A attached hereto and shall, unless terminated as
hereinafter provided, continue until a majority (as defined in
the Act) of the Fund's outstanding voting securities approve a
definitive investment advisory contract with the Advisor, but in
any case no longer than 150 days from the date on which the
Previous Contract terminated.
(b) This Interim Agreement may be terminated by the Advisor at any
time without penalty upon giving PPP sixty (60) days' written
notice (which notice may be waived by PPP) and may be terminated
by the Board of Directors of PPP or a majority (as defined in the
Act) of the Fund's outstanding voting securities at any time,
without the payment of any penalty, on not more than ten (10)
days' written notice to the Advisor (which notice may be waived
by the Advisor). This Interim Agreement shall automatically
terminate in the event of its assignment (as defined in the Act).
7. SERVICES NOT EXCLUSIVE
The services furnished by the Advisor hereunder are not to be deemed
exclusive, and the Advisor shall be free to furnish similar services to others
so long as its services under this Interim Agreement are not impaired thereby.
It is understood that the action taken by the Advisor under this Interim
Agreement may differ from the advice given or the timing or nature of action
taken with respect to other clients of the Advisor, and that a transaction in a
specific security may not be accomplished for all clients of the Advisor at the
same time or at the same price.
8. AMENDMENT
This Interim Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by the
Board of Directors of PPP or by a vote of a majority of the outstanding voting
securities of the Fund (as required by the Act).
9. CONFIDENTIALITY
Subject to the duties of the Advisor and PPP to comply with applicable
law, including any demand of any regulatory or taxing authority having
jurisdiction, the parties hereto shall treat as confidential all information
pertaining to the Fund and PPP and the actions of the Advisor and the Fund in
respect thereof.
10. NOTICES
Any notice that is required to be given by the parties to each other
under the terms of this Interim Agreement shall be in writing, delivered, or
mailed postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Advisor:
NorthPointe Capital, LLC
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Villanova Capital
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Legal Department
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to PPP or the Fund:
Principal Preservation Portfolios, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
11. JURISDICTION
This Interim Agreement shall be governed by and construed to be in
accordance with substantive laws of the State of Wisconsin without reference to
choice of law principles thereof and in accordance with the Act. In the case of
any conflict, the Act shall control.
12. COUNTERPARTS
This Interim Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, all of which shall together
constitute one and the same instrument.
13. CERTAIN DEFINITIONS
For the purposes of this Interim Agreement, "interested person,"
"affiliated person," "assignment" shall have their respective meanings as set
forth in the Act, subject, however, to such exemptions as may be granted by the
SEC.
14. CAPTIONS
The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.
15. SEVERABILITY
If any provision of this Interim Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by duly authorized persons and their seals to be hereunto
affixed, all as of the day and year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By: -------------------------------------------
Title: -----------------------------------------
NORTHPOINTE CAPITAL, LLC
By: --------------------------------------------
Title: -----------------------------------------
EXHIBIT A
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PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INTERIM INVESTMENT ADVISORY AGREEMENT
ON BEHALF OF
SELECT VALUE PORTFOLIO
COMPENSATION
a. Effective Date: September 29, 2000 (as of the opening of trading)
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5, shall be at an annual rate of 0.75 of 1%
of the first $250 million of the average daily net assets of the
Portfolio, and 0.65 of 1% on average daily net assets in excess of
$250 million.
c. Fee Waivers: The Advisor agrees to waive fees as necessary so that
the annual operating expense ratios for this Portfolio for its fiscal
year ending October 31, 2000 do not exceed 1.40% for the Class A
Shares and 2.15% for each of the Class B and Class C Shares.
