Exhibit 77Q1(e)(4)
Xxxxxx Value Fund
Form N-SAR for the period ended 05/31/98
File No. 811-5385
SUB-ADVISORY AGREEMENT
AGREEMENT made this 31st day of December, 1997, by and between
XXXXXXX XXXXXX INVESTMENTS, INC., a Delaware corporation (the
"Adviser") and DREMAN VALUE MANAGEMENT, L.L.C., formerly known as
CONTRARIAN INVESTMENT MANAGEMENT, L.L.C., a Delaware limited
liability company (the "Sub-Adviser").
WHEREAS, XXXXXX VALUE FUND, INC., formerly known as XXXXXX-XXXXXX
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 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
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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, 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's securities.
(g) In compliance with the requirements of Rule 31a-3 under
the Investment Company Act, the Sub-Adviser xxxxxx 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
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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.
(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
calendar 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.
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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.
(d) Sub-Adviser may not terminate this Agreement prior to
July 30, 2000. Sub-Adviser may terminate this Agreement effective
on or after July 30, 2000 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.
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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) 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) 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
6
which the Board of Directors of the Fund is responsible and that
such procedures are identified in writing to the Sub-Adviser;
(b) 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
(c) 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
7
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's 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.
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
8
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's, 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
9
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 part 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 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
10
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.
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/ Xxxx X. Xxxxxxxx
--------------------------------
Title: Vice President
-----------------------------
DREMAN VALUE MANAGEMENT, L.L.C.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Title:
----------------------------
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APPENDIX A
INVESTMENT MANAGEMENT SUB-ADVISORY FEE
Applicable Average
Daily Net Assets
(Thousands) Annual Rate
------------------ -----------
$ 0 - $ 250,000 .240 of 1%
$ 250,000 - $ 1,000,000 .230 of 1%
$ 1,000,000 - $ 2,500,000 .224 of 1%
$ 2,500,000 - $ 5,000,000 .218 of 1%
$ 5,000,000 - $ 7,500,000 .208 of 1%
$ 7,500,000 - $10,000,000 .205 of 1%
$10,000,000 - $12,500,000 .202 of 1%
Over $12,500,000 .198 of 1%
