SUBADVISORY AGREEMENT
This Subadvisory Agreement is made as of ________________ between
Heritage Asset Management, Inc. a Florida corporation (the "Manager"), and
Dreman Value Advisors, Inc. a Delaware corporation (the "Subadviser").
WHEREAS, the Manager has by separate contract agreed to serve as the
investment adviser to the Value Equity Fund ("Fund"), an investment portfolio of
Heritage Series Trust ("Trust"), a Massachusetts business trust registered under
the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
diversified management investment company consisting of one or more investment
series of shares, each having its own assets and investment policies;
WHEREAS, the Manager's contract with the Trust allows it to delegate
certain investment advisory services on behalf of the Fund to other parties; and
WHEREAS, the Manager desires to retain the Subadviser to perform
certain sub-investment advisory services for the Trust with respect to the Fund,
and the Subadviser is willing to perform such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST
(a) INVESTMENT PROGRAM. Subject to the control and supervision of
the Board of Trustees of the Trust and the Manager, the Subadviser
shall, at its expense, continuously furnish to the Fund an investment
program for such portion, if any, of Fund assets that is allocated to
it by the Manager from time to time. With respect to such assets, the
Subadviser will make investment decisions and will place all orders for
the purchase and sale of portfolio securities. In the performance of
its duties, the Subadviser will act in the best interests of the Fund
and will comply with (i) applicable laws and regulations, including,
but not limited to, the 1940 Act, (ii) the terms of this Agreement,
(iii) the stated investment objectives, policies and restrictions of
the Fund, as stated in the then-current Registration Statement of the
Trust, and (iv) such other guidelines as the Trustees or Manager may
establish. The Manager shall be responsible for providing the
Subadviser with current copies of the materials specified in
Subsections (a) (iii) and (iv) of this Section 1.
(b) AVAILABILITY OF PERSONNEL. The Subadviser, at its expense,
will make available to the Trustees and the Manager at reasonable times
its portfolio managers and other appropriate personnel in order to
review investment policies of the Fund and to consult with the Trustees
and the Manager regarding the investment affairs of the Fund, including
economic, statistical and investment matters relevant to the
Subadviser's duties hereunder, and will provide periodic reports to the
Manager relating to the portfolio strategies it employs.
(c) SALARIES AND FACILITIES. The Subadviser, at its expense, will
pay for all salaries of personnel and facilities required for it to
execute its duties under this Agreement.
(d) COMPLIANCE REPORTS. The Subadviser, at its expense, will
provide the Manager with such compliance reports relating to its duties
under this Agreement as may reasonably be necessary for the Manager to
fulfill its compliance obligations.
(e) VALUATION. The Subadviser, at its expense, will provide the
Trust with market price information which may be reasonably requested
by the Manager relating to the assets of the Fund.
(f) EXECUTING PORTFOLIO TRANSACTIONS. The Subadviser will place
all orders pursuant to its investment determinations for the Fund
either directly with the issuer or through broker-dealers selected by
Subadviser; and, in connection therewith, the Subadviser is authorized
as the agent of the Fund to give instructions to the Custodian of the
Fund as to the deliveries of securities and payments of cash for the
account of the Fund. In the selection of broker-dealers and the
placement of orders for the purchase and sale of portfolio investments
for the Fund, the Subadviser shall use its best efforts to obtain for
the Fund the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best
efforts to obtain the most favorable price and execution 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 and dealer's
spread or xxxx-up, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial
stability of the broker-dealer involved, the general execution and
operational facilities of the broker-dealer and the quality of service
rendered by the broker-dealer in other transactions. Subject to such
policies as the Board of Trustees may determine, the Subadviser shall
not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provides brokerage and
research services to the Subadviser an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
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commission another broker-dealer would have charged for effecting that
transaction if the Subadviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker-dealer, viewed in terms
of either that particular transaction or the Subadviser's overall
responsibilities with respect to the Trust and to other clients of the
Subadviser as to which the Subadviser exercises investment discretion.
The Manager recognizes that all research services and research that the
Subadviser receives or generates are available for all clients of the
Subadviser and its affiliates, and that the Fund and other clients of
the Subadviser and its affiliates may benefit thereby. In no instance
will portfolio securities of the Fund be purchased from or sold to the
Subadviser or any affiliated person of the Subadviser. The Trust agrees
that any entity or person associated with the Manager or the Subadviser
that is a member of a national securities exchange is authorized to
effect any transaction on such exchange for the account of the Trust
that is permitted by Section 11(a) of the Securities Exchange Act of
1934, as amended, and the Trust consents to the retention of
compensation for such transactions.
(g) EXPENSES. The Subadviser shall not be obligated to pay any
expenses of or for the Trust or the Fund not expressly assumed by the
Subadviser pursuant to this Agreement.
(h) LIMITATION OF SERVICES. Except as otherwise agreed between the
parties and as provided in this Agreement, the Subadviser shall not be
responsible for compliance monitoring, reporting or testing or for
preparing or maintaining books and records for the Fund or the Trust or
otherwise providing accounting services to the Fund or the Trust
(including portfolio pricing services) and such services shall be
provided by others retained by the Trust. However, nothing herein shall
be construed to limit the Subadviser's duty to ensure that it complies
with (i) applicable laws and regulations, including the 1940 Act. (ii)
the terms of this Agreement, (iii) the stated investment objectives,
policies and restrictions of the Fund, as stated in the then current
registration statement of the Trust, and (iv) such other reasonable
guidelines the Trustees or Manager may establish with respect to the
Subadviser's service hereunder. The Subadviser shall have access to
such reports and records to assist it in performing its services
hereunder.
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2. BOOKS AND RECORDS. Pursuant to Rule 31a-3 under the 1940 Act, the
Subadviser agrees that: (a) all records it maintains for the Trust are the
property of the Trust; (b) it will surrender promptly to the Trust or the
Manager any such records upon the Trust's or Manager's request; (c) it will
maintain for the Trust the records that the Trust is required to maintain
pursuant to Rule 31a-1 insofar as such records relate to the investment affairs
of the Fund; and (d) it will preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records it maintains for the Trust.
3. OTHER AGREEMENTS. The Manager understands that Subadviser now acts,
or may in the future act, as an investment adviser to fiduciary and other
managed accounts, and as investment adviser or subadviser to other investment
companies. Manager has no objection to Subadviser acting in such capacities,
provided that whenever the Fund and one or more other investment advisory
clients of Subadviser have available funds for investment, investments suitable
and appropriate for each will be allocated in a manner believed by Subadviser to
be equitable to each, but Subadviser cannot assure, and assumes no
responsibility for equality among all accounts and customers. Subadviser shall
be permitted to bunch or aggregate orders for the Fund with orders for other
funds and accounts in a manner deemed equitable to all. Manager recognizes that
in some cases this procedure may adversely affect the size of the position or
price that the participating Fund may obtain in a particular security. In
addition, Manager understands that the persons employed by Subadviser to assist
in Subadviser's duties under this Agreement will not devote their full time to
such service and nothing contained in this Agreement will be deemed to limit or
restrict the right of Subadviser or any of its affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
4. COMPENSATION. The Manager will pay to the Subadviser as compensation
for the Subadviser's services rendered pursuant to this Agreement a subadvisory
fee equal to an annual rate of 0.35% of the average daily net assets of the Fund
allocated to the Subadvisor by the Manager. However, if the Manager's fee is
reduced due to the imposition of asset level breakpoints, the Subadviser's Fee
shall be reduced proportionately, provided that in no event shall such
subadvisory fee be reduced below 0.35% for the first $50 million of the Fund's
average daily net assets of the Fund. Such fees shall be payable for each month
within 15 business days after the end of such month. If the Subadviser shall
serve for less than the whole of a month, the compensation as specified shall be
prorated.
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5. AMENDMENT OF AGREEMENT. This Agreement shall not be materially
amended unless such amendment is approved by the affirmative vote of a majority
of the outstanding shares of the Fund, and by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of the
members of the Board of Trustees who are not interested persons of the Trust,
the Manager or the Subadviser (the "Independent Trustees"). The Subadviser
agrees to notify the Manager of any anticipated change in control of the
Subadviser as soon as such change is anticipated and, in any event, prior to
such change.
6. DURATION AND TERMINATION OF THE AGREEMENT. This Agreement shall
become effective upon its execution; provided, however, that this Agreement
shall not become effective unless it has first been approved (a) by a vote of
the Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by an affirmative vote of a majority of the
outstanding voting shares of the Fund. This Agreement shall remain in full force
and effect continuously thereafter, except as follows:
(a) By vote of a majority of the (i) Independent Trustees, or (ii)
outstanding voting shares of the Fund, the Trust may at any time
terminate this Agreement, without the payment of any penalty, by
providing not more than 60 days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager and the Subadviser.
(b) This Agreement will terminate automatically, without the
payment of any penalty, unless within two years after its initial
effectiveness and at least annually thereafter, the continuance of the
Agreement is specifically approved by (i) the Board of Trustees or the
shareholders of the Fund by the affirmative vote of a majority of the
outstanding shares of the Fund, and (ii) a majority of the Independent
Trustees, by vote cast in person at a meeting called for the purpose of
voting on such approval. If the continuance of this Agreement is
submitted to the shareholders of the Fund for their approval and such
shareholders fail to approve such continuance as provided herein, the
Subadviser may continue to serve hereunder in a manner consistent with
the 1940 Act and the rules and regulations thereunder.
(c) The Manager may at any time terminate this Agreement, without
the payment of any penalty, by not less than 60 days' written notice
delivered or mailed by registered mail, postage prepaid, to the
Subadviser, and the Subadviser may at any time, without the payment of
any penalty, terminate this Agreement by not less than 90 days' written
notice delivered or mailed by registered mail, postage prepaid, to the
Manager.
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(d) This Agreement automatically and immediately shall terminate,
without the payment of any penalty, in the event of its assignment or
if the Investment Advisory Agreement between the Manager and the Trust
shall terminate for any reason.
(e) Any notice of termination served on the Subadviser by the
Manager shall be without prejudice to the obligation of the Subadviser
to complete transactions already initiated or acted upon with respect
to the Fund. Upon termination without reasonable notice by the Manager,
the Subadviser will be paid certain previously agreed upon expenses the
Subadviser necessarily incurs in terminating the Agreement.
Upon termination of this Agreement, the duties of the Manager delegated
to the Subadviser under this Agreement automatically shall revert to the
Manager.
7. NOTIFICATION OF THE MANAGER. The Subadviser promptly shall notify
the Manager in writing of the occurrence of any of the following events:
(a) the Subadviser shall fail to be registered as an investment
adviser under the Investment Advisers Act of 1940, as amended, and
under the laws of any jurisdiction in which the Subadviser is required
to be registered as an investment adviser in order to perform its
obligations under this Agreement;
(b) the Subadviser shall have been served or otherwise have notice
of any action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, public board or body, involving the
affairs of the Trust or the Fund; or
(c) any other occurrence that might affect the ability of the
Subadviser to provide the services provided for under this Agreement.
8. DEFINITIONS. For the purposes of this Agreement, the terms "vote of
a majority of the outstanding shares," "affiliated person, "control,"
"interested person" and "assignment" shall have their respective meanings as
defined in the 1940 Act and the rules and regulations thereunder subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission under said Act; and references to annual approvals by the Board of
Trustees shall be construed in a manner consistent with the 1940 Act and the
rules and regulations thereunder.
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9. LIABILITY OF THE SUBADVISER. In the absence of its willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties hereunder, the Subadviser shall not be subject to any
liability to the Manager, the Trust or their directors, trustees, officers or
shareholders, for any act or omission in the course of, or connected with,
rendering services hereunder. However, the Subadviser shall indemnify and hold
harmless such parties from any and all claims, losses, expenses, obligations and
liabilities (including reasonable attorneys fees) which arise or result from the
Subadviser's willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties hereunder.
10. INDEMNIFICATION BY SUBADVISER. The Subadviser agrees to indemnify
and hold harmless the Manager against any losses, expenses, claims, damages or
liabilities (or actions or proceedings in respect thereof), to which the Manager
may become subject arising out of or based on the breach or alleged breach by
the Subadviser of any provisions of this Agreement; provided, however, that the
Subadviser shall not be liable under this paragraph in respect of any loss,
expense, claim, damage or liability to the extent that a court having
jurisdiction shall have determined by a final judgment, or independent counsel
agreed upon by the Manager and the Subadviser shall have concluded in a written
opinion, that such loss, expense, claim, damage or liability resulted primarily
from the Manager's willful misfeasance, bad faith or gross negligence or by
reason of the reckless disregard by the Manager of its duties. The foregoing
indemnification shall be in addition to any rights that the Manager may have at
common law or otherwise. The Subadviser's agreements in this paragraph shall,
upon the same terms and conditions, extend to and inure to the benefit of each
person who may be deemed to control the Manager, be controlled by the Manager or
be under common control with the Manager and its affiliates, directors,
officers, employees and agents. The Subadviser's agreements in this paragraph
shall also extend to any of the Manager's successors or the successors of the
aforementioned affiliates, directors, officers, employees or agents.
11. INDEMNIFICATION BY THE MANAGER. The Manager agrees to indemnify and
hold harmless the Subadviser against any losses, expenses, claims, damages or
liabilities (or actions or proceedings in respect thereof), to which the
Subadviser may become subject arising out of or based on the breach or alleged
breach by the Manager of any provisions of this Agreement or the Manager's
Contract with the Trust, or any wrongful action or alleged wrongful action by
the Manager or its affiliates in the distribution of the Fund's shares, or any
wrongful action or alleged wrongful action by the Fund or the Trust other than
wrongful action or alleged wrongful action that was caused by the breach by the
Subadviser of the provisions of this Agreement; provided, however, that the
Manager shall not be liable under this paragraph in respect of any loss,
expense, claim, damage or liability to the extent that a court having
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jurisdiction shall have determined by a final judgment, or independent counsel
agreed upon by the Manager and the Subadviser shall have concluded in a written
opinion, that such loss, expense, claim, damage or liability resulted primarily
from the Subadviser's willful misfeasance, bad faith or gross negligence or by
reason of the reckless disregard by the Subadviser of its duties. The foregoing
indemnification shall be in addition to any rights that the Subadviser may have
at common law or otherwise. The Manager's agreements in this paragraph shall,
upon the same terms and conditions, extend to and inure to the benefit of each
person who may be deemed to control the Subadviser, be controlled by the
Subadviser or be under common control with the Subadviser and to each of the
Subadviser's and each such person's respective affiliates, directors, officers,
employees and agents. The Manager's agreements in this paragraph shall also
extend to any of the Subadviser's successors or the successors of the
aforementioned affiliates, directors, officers, employees or agents.
12. LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligations of the
Trust under this Agreement are not binding upon the Trustees or the Shareholders
individually but are binding only upon the assets and property of the Fund.
13. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Florida, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act To the extent that the
applicable laws of the State of Florida conflict with the applicable provisions
of the 1940 Act, the latter shall control.
14. SEVERABILITY. 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
upon and shall inure to the benefit of the parties hereto and their respective
successors.
15. 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. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
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IN WITNESS WHEREOF, Heritage Asset Management, Inc. and Dreman Value
Advisors, Inc. have each caused this instrument to be signed in duplicate on its
behalf by its duly authorized representative, all as of the day and year first
above written.
DREMAN VALUE ADVISORS, INC. HERITAGE ASSET MANAGEMENT, INC.
By: ____________________________ By: ___________________________
Attest: Attest:
By: ____________________________ By: ___________________________
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