SUB-ADVISORY AGREEMENT
AGREEMENT made this 7th day of September, 1998, by and between XXXXXXX
XXXXXX INVESTMENTS, INC., a Delaware corporation (the "Adviser") and DREMAN
VALUE MANAGEMENT, L.L.C., a Delaware limited liability company (the
"Sub-Adviser").
WHEREAS, XXXXXX VALUE SERIES, INC., formerly known as XXXXXX VALUE FUND,
INC., a Maryland corporation (the "Fund") is a management investment company
registered under the Investment Company Act of 1940 ("the Investment Company
Act");
WHEREAS, the Fund has retained the Adviser to render to it investment
advisory and management services with regard to the Fund, including the series
known as the Xxxxxx-Xxxxxx High Return Equity Fund (the "High Return Series"),
pursuant to an Investment Management Agreement (the "Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the Sub-Adviser to
render investment advisory and management services for the High Return Series
and the Sub-Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. Appointment of Sub-Adviser.
(a) The Adviser hereby employs the Sub-Adviser to manage the
investment and reinvestment of the assets of the High Return Series in
accordance with the applicable investment objectives, policies and limitations
and subject to the supervision of the Adviser and the Board of Directors of the
Fund for the period and upon the terms herein set forth, and to place orders for
the purchase or sale of portfolio securities for the High Return Series account
with brokers or dealers selected by the Sub-Adviser; and, in connection
therewith, the Sub-Adviser is authorized as the agent of the High Return Series
to give instructions to the Custodian and of the Fund as to the deliveries of
securities and payments of cash for the account of the High Return Series. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser is directed to seek for the High Return Series best
execution of orders. Subject to such policies as the Board of Directors of the
Fund determines and subject to satisfying the requirements of Section 28(e) of
the Securities Exchange Act of 1934, the Sub-Adviser 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 High Return Series to pay a
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Sub-Adviser determined 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 or dealer viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the clients of the Sub-Adviser as to which the
Sub-Adviser exercises investment discretion. The Adviser recognizes that all
research services and research that the Sub-Adviser receives are available for
all clients of the Sub-Adviser, and that the High Return Series and other
clients of the Sub-Adviser may benefit thereby. The investment of funds shall be
subject to all applicable restrictions of the Articles of Incorporation and
By-Laws of the Fund as may from time to time be in force.
(b) The Sub-Adviser accepts such employment and agrees during
the period of this Agreement to render such investment management services, to
furnish related office facilities and equipment and clerical, bookkeeping and
administrative services for the High Return Series, and to assume the other
obligations herein set forth for the compensation herein provided. The
Sub-Adviser shall assume and pay all of the costs and expenses of performing its
obligations under this Agreement. The Sub-Adviser shall for all purposes herein
provided be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Fund, the High Return
Series or the Adviser in any way or otherwise be deemed an agent of the Fund,
the High Return Series or the Adviser.
(c) The Sub-Adviser will keep the Adviser, for itself and on
behalf of the Fund, informed of developments materially affecting the Fund or
the High Return Series and shall, on the Sub-Adviser's own initiative and as
reasonably requested by the Adviser, for itself and on behalf of the Fund,
furnish to the Adviser from time to time whatever information the Adviser
reasonably believes appropriate for this purpose.
(d) The Sub-Adviser shall provide the Adviser with such
investment portfolio accounting and shall maintain and provide such detailed
records and reports as the Adviser may from time to time reasonably request,
including without limitation, daily processing of investment transactions and
periodic valuations of investment portfolio positions as required by the
Adviser, monthly reports of the investment portfolio and all investment
transactions and the preparation of such reports and compilation of such data as
may be required by the Adviser to comply with the obligations imposed upon it
under the Management Agreement. Sub-Adviser agrees to install in its offices
computer equipment or software, as provided by the Adviser at its expense, for
use by the Sub-Adviser in performing its duties under this Sub-Advisory
Agreement, including inputting on a daily basis that day's portfolio
transactions in the High Return Series.
(e) The Sub-Adviser shall maintain and enforce adequate
security procedures with respect to all materials, records, documents and data
relating to any of its responsibilities pursuant to this Agreement including all
means for the effecting of securities transactions.
(f) The Sub-Adviser agrees that it will provide to the Adviser
or the Fund promptly upon request reports and copies of such of its investment
records and ledgers with respect to the High Return Series as appropriate to
assist the Adviser and the Fund in monitoring compliance with the Investment
Company Act and the Investment Advisers Act of 1940 (the "Advisers Act"), as
well as other applicable laws. The Sub-Adviser will furnish the Fund's Board of
Directors such periodic and special reports with respect to the High Return
Series as the Adviser or the Board of Directors may reasonably request,
including statistical information with respect to the High Return Series'
securities.
(g) In compliance with the requirements of Rule 31a-3 under
the Investment Company Act, the Sub-Adviser hereby agrees that any records that
it maintains for the Fund are the property of the Fund and further agrees to
surrender promptly any such records upon the Fund's or the Adviser's request,
although the Sub-Adviser may, at the Sub-Adviser's own expense, make and retain
copies of such records. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the Investment Company Act any records
with respect to the Sub-Adviser's duties hereunder required to be maintained by
Rule 31a-1 under the Investment Company Act to the extent that the Sub-Adviser
prepares and maintains such records pursuant to this Agreement and to preserve
the records required by Rule 204-2 under the Advisers Act for the period
specified in that Rule.
(h) The Sub-Adviser agrees that it will immediately notify the
Adviser and the Fund in the event that the Sub-Adviser: (i) becomes subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Agreement; or (ii) is or expects to become
the subject of an administrative proceeding or enforcement action by the United
States Securities and Exchange Commission ("SEC") or other regulatory authority.
(i) The Sub-Adviser agrees that it will immediately forward,
upon receipt, to the Adviser, for itself and as agent for the Fund, any
correspondence from the SEC or other regulatory authority that relates to the
High Return Series.
(j) The Sub-Adviser acknowledges that it is an "investment
adviser" to the Fund within the meaning of the Investment Company Act and the
Advisers Act.
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(k) The Sub-Adviser shall be responsible for maintaining an
appropriate compliance program to ensure that the services provided by it under
this Agreement are performed in a manner consistent with applicable laws and the
terms of this Agreement. Sub-Adviser agrees to provide such reports and
certifications regarding its compliance program as the Adviser or the Fund shall
reasonably request from time to time. Furthermore, the Sub-Adviser shall
maintain and enforce a Code of Ethics which in form and substance is consistent
with industry norms as changed from time to time. Sub-Adviser agrees to allow
the Board of Directors of the Fund to review its Code of Ethics upon request.
Sub-Adviser agrees to report to the Adviser on a quarterly basis any violations
of the Code of Ethics of which its senior management becomes aware.
2. Compensation.
For the services and facilities described herein, the Adviser
will pay to the Sub-Adviser, 15 days after the end of each calendar month, a
sub-advisory fee computed by applying the annual rates set forth in Appendix A
to the applicable average daily net assets of the High Return Series.
For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration on the basis of
the number of days that the Agreement is in effect during the month and year,
respectively.
The Adviser further agrees that notwithstanding Appendix A the
minimum amounts payable to Sub-Adviser during the following years that
Sub-Adviser serves under this Agreement shall be $1.0 million in 1997 and $8
million in each of 2000, 2001, and 2002 for services rendered during each of
those years. The payments, if any, made under the foregoing sentence shall be
made by January 15 of the year immediately following the calendar year to which
such payment relates.
3. Net Asset Value. The net asset value for the High Return Series
shall be calculated as the Board of Directors of the Fund may determine from
time to time in accordance with the provisions of the Investment Company Act. On
each day when net asset value is not calculated, the net asset value of the High
Return Series shall be deemed to be the net asset value as of the close of
business on the last day on which such calculation was made for the purpose of
the foregoing computations.
4. Duration and Termination.
(a) This Agreement shall become effective with respect to the
High Return Series on the date hereof and shall remain in full force until
December 31, 2002, unless sooner terminated or not annually approved as
hereinafter provided. Notwithstanding the foregoing, this Agreement shall
continue in force through December 31, 2002, and from year to year thereafter,
only as long as such continuance is specifically approved at least annually and
in the manner required by the Investment Company Act and the rules and
regulations thereunder, with the first annual renewal to be coincident with the
next renewal of the Management Agreement.
(b) This Agreement shall automatically terminate in the event
of its assignment or in the event of the termination of the Management
Agreement. In addition, Adviser has the right to terminate this Agreement upon
immediate notice if the Sub-Adviser becomes statutorily disqualified from
performing its duties under this Agreement or otherwise is legally prohibited
from operating as an investment adviser.
(c) This Agreement may be terminated at any time, without the
payment by the Fund of any penalty, by the Board of Directors of the Fund, or by
vote of a majority of the outstanding voting securities of the High Return
Series, or by the Adviser. The Fund may effect termination of this Agreement by
action of the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the High Return Series on sixty (60) days
written notice to the Adviser and the Sub-Adviser. The Adviser may effect
termination of this Agreement on sixty (60) days written notice to the
Sub-Adviser.
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(d) Sub-Adviser may not terminate this Agreement prior to the
third anniversary of the original Sub-Advisory Agreement dated July 30, 1997.
Sub-Adviser may terminate this Agreement effective on or after the third
anniversary of the Agreement dated July 30, 1997 upon ninety (90) days written
notice to the Adviser.
(e) The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
(f) Termination of this Agreement shall not affect the right
of the Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 2 earned prior to such termination.
(g) The provisions of Section 9 shall survive the termination
of this Agreement.
5. Representations and Warranties. The Sub-Adviser hereby represents
and warrants as follows:
(a) The Sub-Adviser is registered with the SEC as an
investment adviser under the Advisers Act, and such registration is current,
complete and in full compliance with all material applicable provisions of the
Advisers Act and the rules and regulations thereunder;
(b) The Sub-Adviser has all requisite authority to enter into,
execute, deliver and perform the Sub-Adviser's obligations under this Agreement;
(c) The Sub-Adviser's performance of its obligations under
this Agreement does not conflict with any law, regulation or order to which the
Sub-Adviser is subject; and
(d) The Sub-Adviser has reviewed the portion of (i) the
registration statement filed with the SEC, as amended from time to time for the
Fund ("Registration Statement"), and (ii) the Fund's prospectus and supplements
thereto, in each case in the form received from the Adviser with respect to the
disclosure about the Sub-Adviser and the High Return Series of which the
Sub-Adviser has knowledge (the "Sub-Adviser and High Return Information") and
except as advised in writing to the Adviser such Registration Statement,
prospectus and any supplement contain, as of its date, no untrue statement of
any material fact of which Sub-Adviser has knowledge and do not omit any
statement of a material fact of which Sub-Adviser has knowledge which was
required to be stated therein or necessary to make the statements contained
therein not misleading.
6. Covenants. The Sub-Adviser hereby covenants and agrees that, so long
as this Agreement shall remain in effect:
(a) The Sub-Adviser shall maintain the Sub-Adviser's
registration as an investment adviser under the Advisers Act, and such
registration shall at all times remain current, complete and in full compliance
with all material applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(b) The Sub-Adviser's performance of its obligations under
this Agreement shall not conflict with any law, regulation or order to which the
Sub-Adviser is then subject;
(c) The Sub-Adviser shall at all times comply with the
Advisers Act and the Investment Company Act, and all rules and regulations
thereunder, and all other applicable laws and regulations, and the Registration
Statement, prospectus and any supplement and with any applicable procedures
adopted by the Fund's Board of Directors, provided that such procedures are
substantially similar to those applicable to similar funds for which the Board
of Directors of the Fund is responsible and that such procedures are identified
in writing to the Sub-Adviser;
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(d) The Sub-Adviser shall promptly notify Adviser and the Fund
upon the occurrence of any event that might disqualify or prevent the
Sub-Adviser from performing its duties under this Agreement. The Sub-Adviser
further agrees to notify Adviser of any changes that would cause the
Registration Statement or prospectus for the Fund to contain any untrue
statement of a material fact or to omit to state a material fact which is
required to be stated therein or is necessary to make the statements contained
therein not misleading, in each case relating to Sub-Adviser and High Return
Information; and
(e) For the entire time this Agreement is in effect and for a
period of two years thereafter, the Sub-Adviser shall maintain a claims made
bond issued by a reputable fidelity insurance company against larceny and
embezzlement, covering each officer and employee of Sub-Adviser, at a minimum
level of $2 million which provide coverage for acts or alleged acts which
occurred during the period of this Agreement.
7. Use of Names.
(a) The Sub-Adviser acknowledges and agrees that the names
Xxxxxx Value Fund, Xxxxxx, and Zurich, and abbreviations or logos associated
with those names, are the valuable property of Adviser and its affiliates; that
the Fund, Adviser and their affiliates have the right to use such names,
abbreviations and logos; and that the Sub-Adviser shall use the names Xxxxxx
Value Fund, Xxxxxx, and Zurich, and associated abbreviations and logos, only in
connection with the Sub-Adviser's performance of its duties hereunder. Further,
in any communication with the public and in any marketing communications of any
sort, Sub-Adviser agrees to obtain prior written approval from Adviser before
using or referring to Xxxxxx Value Fund, Xxxxxx, Zurich or Xxxxxx-Xxxxxx High
Return Equity Fund or any abbreviations or logos associated with those names;
provided that nothing herein shall be deemed to prohibit the Sub-Adviser from
referring to the performance of the Xxxxxx-Xxxxxx High Return Equity Fund in the
Sub-Adviser's marketing material as long as such marketing material does not
constitute "sales literature" or "advertising" for the High Return Series, as
those terms are used in the rules, regulations and guidelines of the SEC and the
National Association of Securities Dealers, Inc.
(b) Adviser acknowledges that "Dreman" is distinctive in
connection with investment advisory and related services provided by the
Sub-Adviser, the "Dreman" name is a property right of the Sub-Adviser, and the
"Dreman" name as used in the name of the High Return Series is understood to be
used by the Fund upon the conditions hereinafter set forth; provided that the
Fund may use such name only so long as the Sub-Adviser shall be retained as the
investment sub-adviser of the High Return Series pursuant to the terms of this
Agreement.
(c) Adviser acknowledges that the Fund and its agents may use
the "Dreman" name in the name of the High Return Series for the period set forth
herein in a manner not inconsistent with the interests of the Sub-Adviser and
that the rights of the Fund and its agents in the "Dreman" name are limited to
their use as a component of the High Return Series name and in connection with
accurately describing the activities of the High Return Series, including use
with marketing and other promotional and informational material relating to the
High Return Series. In the event that the Sub-Adviser shall cease to be the
investment sub-adviser of the High Return Series, then the Fund at its own or
the Adviser's expense, upon the Sub-Adviser's written request: (i) shall cease
to use the Sub-Adviser's name as part of the name of the High Return Series or
for any other commercial purpose (other than the right to refer to the High
Return Series' former name in the Fund's Registration Statement, proxy materials
and other Fund documents to the extent required by law and, for a reasonable
period the use of the name in informing others of the name change); and (ii)
shall use its best efforts to cause the Fund's officers and directors to take
any and all actions which may be necessary or desirable to effect the foregoing
and to reconvey to the Sub-Adviser all rights which the Fund may have to such
name. Adviser agrees to take any and all reasonable actions as may be necessary
or desirable to effect the foregoing and Sub-Adviser agrees to allow the Fund
and its agents a reasonable time to effectuate the foregoing.
(d) The Sub-Adviser hereby agrees and consents to the use of
the Sub-Adviser's name upon the foregoing terms and conditions.
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8. Standard of Care. Except as may otherwise be required by law, and
except as may be set forth in paragraph 9, the Sub-Adviser shall not be liable
for any error of judgment or of law or for any loss suffered by the Fund, the
High Return Series or the Adviser in connection with the matters to which this
Agreement relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Sub-Adviser in the performance of its
obligations and duties or by reason of its reckless disregard of its obligations
and duties under this Agreement.
9. Indemnifications.
(a) The Sub-Adviser agrees to indemnify and hold harmless
Adviser and the Fund against any losses, expenses, claims, damages or
liabilities (or actions or proceedings in respect thereof), to which Adviser or
the Fund may become subject arising out of or based on the breach or alleged
breach by the Sub-Adviser of any provisions of this Agreement; provided,
however, that the Sub-Adviser 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 Sub-Adviser and the Adviser or the Fund,
as the case may be, shall have concluded in a written opinion, that such loss,
expense, claim, damage or liability resulted primarily from the Adviser's or the
Fund's willful misfeasance, bad faith or gross negligence or by reason of the
reckless disregard by the Adviser or the Fund of its duties. The foregoing
indemnification shall be in addition to any rights that the Adviser or the Fund
may have at common law or otherwise. The Sub-Adviser'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 Adviser or the Fund and
their affiliates, directors, officers, employees and agents. The Sub-Adviser's
agreement in this paragraph shall also extend to any of the Fund's, High Return
Series', and Adviser's successors or the successors of the aforementioned
affiliates, directors, officers, employees or agents.
(b) The Adviser agrees to indemnify and hold harmless the
Sub-Adviser against any losses, expenses, claims, damages or liabilities (or
actions or proceedings in respect thereof), to which the Sub-Adviser may become
subject arising out of or based on the breach or alleged breach by the Adviser
of any provisions of this Agreement or the Management Agreement, or any wrongful
action or alleged wrongful action by the Adviser or its affiliates in the
distribution of the Fund's shares, or any wrongful action or alleged wrongful
action by the Fund other than wrongful action or alleged wrongful action that
was caused by the breach by Sub-Adviser of the provisions of this Agreement;
provided, however, that the Adviser 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 Adviser and the Sub-Adviser shall have
concluded in a written opinion, that such loss, expense, claim, damage or
liability resulted primarily from the Sub-Adviser's willful misfeasance, bad
faith or gross negligence or by reason of the reckless disregard by the
Sub-Adviser of its duties. The foregoing indemnification shall be in addition to
any rights that the Sub-Adviser may have at common law or otherwise. The
Adviser'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 Sub-Adviser, be controlled by the Sub-Adviser or be under common
control with the Sub-Adviser and to each of the Sub-Adviser's and each such
person's respective affiliates, directors, officers, employees and agents. The
Adviser's agreements in this paragraph shall also extend to any of the
Sub-Adviser's successors or the successors of the aforementioned affiliates,
directors, officers, employees or agents.
(c) Promptly after receipt by a party indemnified under
paragraphs 9(a) and 9(b) above of notice of the commencement of any action,
proceeding, or investigation for which indemnification will be sought, such
indemnified party shall promptly notify the indemnifying party in writing; but
the omission so to notify the indemnifying party shall not relieve it from any
liability which it may otherwise have to any indemnified party unless such
omission results in actual material prejudice to the indemnifying party. In case
any action or proceeding shall be brought against any indemnified party, and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, individually or
jointly with any other indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of any action or proceeding, the indemnifying party
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shall not be liable to the indemnified party for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. If the indemnifying party
does not elect to assume the defense of any action or proceeding, the
indemnifying party on a monthly basis shall reimburse the indemnified party for
the reasonable legal fees and other costs of defense thereof. Regardless of
whether or not the indemnifying party shall have assumed the defense of any
action or proceeding, the indemnified party shall not settle or compromise the
action or proceeding without the prior written consent of the indemnifying
party, which shall not be unreasonably withheld.
10. Survival. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
be thereby affected.
11. Notices. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
12. Governing Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of New York.
13. Miscellaneous.
(a) 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.
(b) Terms not defined herein shall have the meaning set forth
in the Fund's prospectus.
(c) This Agreement may be executed simultaneously 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.
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IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of the day and year first above written.
XXXXXXX XXXXXX INVESTMENTS, INC.
By:/s/Xxxxxxxx X. Small
--------------------------------
Title: Managing Director
----------------------------
DREMAN VALUE MANAGEMENT, L.L.C.
By: /s/Xxxxx X. Xxxxxx
--------------------------------
Title:Chairman
-----------------------------
FOR THE PURPOSE OF ACCEPTING ITS
OBLIGATIONS UNDER SECTION 7 HEREIN
ONLY
XXXXXX VALUE SERIES, INC.
By:/s/Xxxx X. Xxxxxx
--------------------------------
Title: President
-----------------------------
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