SUB-INVESTMENT MANAGEMENT AGREEMENT
AMONG
XXXX XXXXXXX VARIABLE SERIES TRUST I
FEDERATED INVESTMENT MANAGEMENT COMPANY
AND
XXXX XXXXXXX LIFE INSURANCE COMPANY
SUB-INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 1st day of June 2000 by and among Xxxx Xxxxxxx
Variable Series Trust I, a Massachusetts business trust (the "Series"),
Federated Investment Management Company, a Delaware business trust
("Federated"), and Xxxx Xxxxxxx Life Insurance Company, a Massachusetts
corporation ("JHLICO").
WHEREAS, the Series is organized and is engaged in business as an open-end
management investment company and is so registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, JHLICO and Federated are each engaged in the business of
rendering investment advice under the Investment Advisers Act of 1940, as
amended; and
WHEREAS, the Series is authorized to issue its shares in separate classes,
with each such class representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Series offers shares in several classes, one of which is
designated as the Core Bond Portfolio (together with all other classes
established by the Series, collectively referred to as the "Portfolios"), each
of which pursues its investment objectives through separate investment policies;
WHEREAS, the Series has retained JHLICO to render investment management
services to the Series pursuant to an Investment Management Agreement dated as
of July 28, 1999, as amended, (the "Investment Management Agreement"), pursuant
to which it may contract with Federated as a sub-investment manager as provided
for herein; and
WHEREAS JHLICO and the Series desire to retain Federated to render
portfolio management services in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-INVESTMENT MANAGER
(a) Subject Portfolio. Federated is hereby appointed and Federated hereby
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accepts the appointment to act as investment adviser and manager to the Core
Bond Portfolio (the "Subject Portfolio") effective June 1 2000 for the period
and on the terms herein set forth, and for the compensation herein provided.
(b) Additional Subject Portfolios. In the event that the Series and JHLICO
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desire to retain Federated to render investment advisory services hereunder for
any other Portfolio, they shall so notify Federated in writing. If it is willing
to render such services, Federated shall notify the Series in writing, whereupon
such Portfolio shall become a Subject Portfolio hereunder.
(c) Incumbency Certificates. Federated shall furnish to JHLICO,
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immediately upon execution of this Agreement, a certificate of a senior officer
of Federated setting forth (by name and title, and including specimen
signatures) those officers and employees of Federated who are authorized to give
instructions for the Subject Portfolio pursuant to the provisions of this
Agreement. Federated shall promptly provide supplemental certificates in
connection with each additional Subject Portfolio (if any) and further
supplemental certificates, as needed, to reflect all changes with respect to
such authorized officers and employees for any Subject Portfolio. On behalf of
the Series, JHLICO shall instruct the custodian for the Subject Portfolio to
accept instructions with respect to the Subject Portfolio from the officers and
employees of Federated so named.
(d) Independent Contractor. Federated shall for all purposes herein be
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deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or be deemed an agent of
the Series.
(e) Federated's Representations. Federated represents, warrants and agrees
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(i) that it is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended, and that it will remain so registered and will comply
with the requirements of said Act, and the rules and regulations thereunder, at
all times while this Agreement remains in effect, (ii) that it will promptly
notify JHLICO if the foregoing representation and agreement shall cease to be
true in any material respect at any time during the term of this Agreement,
(iii) that it will promptly notify JHLICO of any material change in the
ownership of Federated, or of any change in the identity of the personnel who
manage the Subject Portfolio, (iv) that it has adopted a code of ethics
complying with the requirements of Section 17(j) and Rule 17j-1 under the 1940
Act and has provided true and complete copies of such code to the Series and to
JHLICO, and has adopted procedures designed to prevent violations of such code,
(v) that it has furnished the Series and JHLICO each with a copy of Federated's
Form ADV, as most recently filed with the Securities and Exchange Commission
("SEC"), and will promptly furnish copies of each future amendment thereto; and
(vi) that it presently maintains, and shall continue to maintain as long as this
Agreement is in effect, sufficient Directors & Officers, Errors & Omissions and
fidelity bond insurance coverages to provide coverage to JHLICO, the Series and
the Subject Portfolio for any claims or losses arising from, or in connection
with, the activities of Federated and its officers and employees with respect to
the Subject Portfolio.
2. PROVISION OF INVESTMENT MANAGEMENT SERVICES.
Federated will provide for the Subject Portfolio a continuing and
suitable investment program consistent with the investment objectives, policies,
guidelines and restrictions of said Portfolio, as established by the Series and
JHLICO. From time to time, JHLICO or the Series may provide Federated with
additional or amended investment policies, guidelines and restrictions with
reasonable advance notice where feasible. Federated, as sub-investment manager,
will manage the investment and reinvestment of the assets in the Subject
Portfolio, and perform the functions set forth below, (i) subject to the overall
supervision, direction, control and review of JHLICO and the Board of Trustees
of the Series, and (ii) consistent with the applicable investment objectives,
policies, guidelines and restrictions, the provisions of the
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Series' Declaration of Trust, By-laws, prospectus, statement of additional
information (each as in effect from time to time and provided to Federated by
JHLICO), the 1940 Act and all other applicable laws and regulations (including
any applicable investment restrictions imposed by state insurance laws and
regulations or any other directions or instructions delivered to Federated in
writing by JHLICO or the Series from time to time, such directions or
instructions to be provided in advance to Federated where feasible).
By its signature below, Federated acknowledges receipt of a copy of the Series'
Declaration of Trust, By-laws, prospectus, and statement of additional
information, each as in effect on the date of this Agreement.
Federated will, at its own expense:
(a) advise the Series in connection with investment policy decisions to be
made by its Board of Trustees or any committee thereof regarding the Subject
Portfolio and, upon request, furnish the Series with research, economic and
statistical data in connection with said Portfolio's investments and investment
policies;
(b) submit such reports and information as JHLICO or the Series' Board of
Trustees may reasonably request, to assist the custodian in its determination of
the market value of securities held in the Subject Portfolio;
(c) place orders for purchases and sales of portfolio investments for the
Subject Portfolio and, in connection therewith, execute any and all documents as
attorney-in-fact for the Subject Portfolio as may reasonably be necessary,
desireable, or convenient;
(d) give instructions to the Subject Portfolio's custodian concerning the
delivery of securities and transfer of cash for the Subject Portfolio;
(e) maintain and preserve the records relating to its activities hereunder
required by the 1940 Act to be maintained and preserved by the Series, to the
extent not maintained by the custodian, transfer agent or JHLICO;
(f) at or prior to the close of business each day, provide JHLICO and the
custodian with trade information for each transaction effected for the Subject
Portfolio, and promptly provide to the custodian information on all brokerage or
dealer confirmations;
(g) as soon as practicable following the end of each calendar month,
provide JHLICO with information on all transactions effected for the Subject
Portfolio during the month, a summary listing all investments held in such
Portfolio as of the last day of the month, and such other information as JHLICO
may reasonably request in connection with the accounting services that JHLICO
provides for the Subject Portfolio; and
(h) absent specific instructions to the contrary provided to it by JHLICO
and subject to its receipt of all necessary voting materials, vote all proxies
with respect to investments of the Subject Portfolio in accordance with
Federated's proxy voting policy as most recently provided to JHLICO.
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On its own initiative, Federated will apprise JHLICO and the Series of
important political and economic developments materially affecting the
marketplace or the Subject Portfolio, and will furnish JHLICO and the Series'
Board of Trustees from time to time such information as is appropriate for this
purpose. Federated will also make its investment personnel available in Boston,
Massachusetts or other reasonable locations as often as semi-annually to discuss
the Subject Portfolio and Federated's routine management thereof. Federated will
also make qualified personnel available in Boston or other reasonable locations
upon reasonable request to educate JHLICO sales personnel with respect thereto,
and for such other purposes as the Series or JHLICO may request.
The Series and JHLICO will provide timely information to Federated
regarding such matters as purchases and redemptions of shares in the Subject
Portfolio and the cash requirements of, and cash available for investment in,
the Subject Portfolio. JHLICO will timely provide Federated with monthly
accounting statements for the Subject Portfolio, and such other information
(including, without limitation, reports concerning the classification of Subject
Portfolio securities for purposes of Subchapter M of the Internal Revenue Code
and Treasury Regulations Section 1.817) as may be reasonably necessary or
appropriate in order for Federated to perform its responsibilities hereunder.
3. ALLOCATION OF EXPENSES.
Each party to this Agreement shall bear the costs and expenses of
performing its obligations hereunder. In this regard, the Series specifically
agrees to assume the expense of:
(a) brokerage commissions for transactions in the portfolio investments of
the Series and similar fees and charges for the acquisition, disposition,
lending or borrowing of such portfolio investments;
(b) custodian fees and expenses;
(c) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Series to federal, state or other governmental agencies;
and
(d) interest payable on the Series' borrowings.
Nothing in this Agreement shall alter the allocation of expenses and costs
agreed upon between the Series and JHLICO in the Investment Management Agreement
or any other agreement to which they are parties.
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4. SUB-ADVISORY FEES.
For all of the services rendered with respect to the Subject Portfolio as
herein provided, JHLICO shall pay to Federated a fee (for the payment of which
the Series shall have no obligation or liability), based on the Current Net
Assets of the Subject Portfolio, as set forth in Schedule I attached hereto and
made a part hereof. Such fee shall be accrued daily and payable monthly, as soon
as practicable after the last day of each calendar month. In the case of
termination of this Agreement with respect to the Subject Portfolio during any
calendar month, the fee with respect to such Portfolio accrued to but excluding
the date of termination shall be paid promptly following such termination. For
purposes of computing the amount of advisory fee accrued for any day, "Current
Net Assets" shall mean the Subject Portfolio's net assets as of the most recent
preceding day for which the Subject Portfolio's net assets were computed.
5. PORTFOLIO TRANSACTIONS.
In connection with the investment and reinvestment of the assets of the
Subject Portfolio, Federated will place purchase and sell orders for the Subject
Portfolio with or through such banks, brokers, dealers or other firms dealing in
securities ("Brokers") as it determines, which may include Brokers that are
affiliated persons of Federated, provided such orders are exempt from the
provisions of Section 17(a), (d) and (e) of the 1940 Act. Federated is
authorized to select the Broker that will execute purchase and sale transactions
for the Portfolio and to use its best efforts to obtain the best available price
and most favorable execution in relation to the services received on behalf of
the Portfolio with respect to all such purchases and sales of portfolio
securities for said Portfolio. Federated shall maintain records adequate to
demonstrate compliance with this requirement. Subject to this primary
requirement, and maintaining as its first consideration the benefits to the
Subject Portfolio and its shareholders, Federated shall have the right subject
to the control of the Board of Trustees, and to the extent authorized by the
Securities Exchange Act of 1934, to follow a policy of selecting Brokers who
furnish brokerage and research services to the Subject Portfolio or to
Federated, and who charge a higher commission rate to the Subject Portfolio than
may result when allocating brokerage solely on the basis of seeking the prices
which are advantageous to the Subject Portfolio; provided, however, that any
such higher commission rate shall be reasonable and no less advantageous to the
subject Portfolio than it is to other accounts managed or sub-advised by
Federated . Federated shall determine in good faith that such higher cost was
reasonable in relation to the value of the brokerage and research services
provided to the Subject Portfolio and JHLICO. In selecting Brokers, Federated
may also consider the reliability, integrity and financial condition of the
Broker, and the size of and difficulty in executing the order.
Federated will not receive any tender offer solicitation fees or similar
payments in connection with the tender of investments of any Portfolio.
6. OWNERSHIP OF INFORMATION, RECORDS, AND CONFIDENTIALITY.
The Series shall own and control all records maintained hereunder by
Federated on the Series' behalf and, in the event of termination of this
Agreement with respect to any Portfolio for any reason, all records relating to
that Portfolio shall be promptly returned to the Series, free
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from any claim or retention of rights by Federated, provided that (subject to
the last paragraph of this Section 6) Federated may retain copies of such
records. Federated also agrees, upon request of the Series, promptly to
surrender such books and records or, at its expense, copies thereof, to the
Series or to make such books and records available for audit or inspection: (a)
by representatives of regulatory authorities; or (b) during normal business
hours, upon reasonable notice, by other persons reasonably designated by the
Series. Federated further agrees to maintain, prepare and preserve such books
and records in accordance with the 1940 Act and rules thereunder, including but
not limited to Section 31 and Rules 31a-1 and 31a-2, to the extent such records
are not maintained by the custodian, transfer agent or JHLICO, and to supply all
information requested by any securities and insurance regulatory authorities to
determine whether all securities and insurance laws and regulations are being
complied with. Federated shall supply the Board of Trustees and officers of the
Series and JHLICO with all statistical information regarding investments which
is reasonably required by them and reasonably available to Federated.
Federated shall not disclose or use any records or information obtained
pursuant hereto in any manner whatsoever except as expressly authorized herein,
and will keep confidential any information obtained pursuant hereto, and
disclose such information only if the Series has authorized such disclosure, or
if such disclosure is expressly required by applicable federal or state
regulatory authorities.
7. LIABILITY; STANDARD OF CARE.
No provision of this Agreement shall be deemed to protect Federated or
JHLICO against any liability to the Series or its shareholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations and duties under this Agreement or the Investment Management
Agreement; or any failure to comply with section 1(e)(i), (ii), (iii), (iv) or
(vi) of this Agreement. Nor shall any provision hereof be deemed to protect any
trustee or officer of the Series against any such liability to which he or she
might otherwise be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of his or her duties or the reckless
disregard of his or her obligations and duties. Federated shall employ only
qualified personnel to manage the Subject Portfolio; shall comply with all
applicable laws and regulations in the discharge of its duties under this
Agreement; shall (as provided in Section 2 above) comply with the investment
objectives, policies, guidelines and restrictions of the Subject Portfolio and
with the provisions of the Series' Declaration of Trust, By-laws, prospectus and
statement of additional information or any supplements thereto; shall manage the
Subject Portfolio (subject to the receipt of, and based upon the information
contained in, periodic reports from JHLICO or the custodian concerning the
classification of Portfolio securities for such purposes) as a regulated
investment company in accordance with subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), and Treasury Regulations Section 1.817-5(b);
shall act at all times in the best interests of the Series; and shall discharge
its duties with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent person acting in a like capacity and familiar
with such matters would use in the conduct of a similar enterprise. However,
Federated shall not be obligated to perform any service not described in this
Agreement, and shall not be deemed by virtue of this Agreement to have made any
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representation or warranty that any level of investment performance or level of
investment results will be achieved.
In the absence of willful misfeasance, bad faith or gross negligence on
the part of Federated, or reckless disregard by Federated of its obligations and
duties hereunder, or any failure to comply with section 1(e)(i), (ii), (iii),
(iv) or (vi) of this Agreement, Federated shall not be subject to any liability
to JHLICO, the Subject Portfolio, the Series, any shareholder of the Subject
Portfolio, or to any person, firm or organization. Without limiting the
foregoing, Federated shall not have any liability whatsoever for any investment
losses incurred by a Subject Portfolio, or arising from transactions by a
Subject Portfolio, prior to the date on which Federated assumes responsibility
for the management of the Subject Portfolio's securities portfolio, except to
the extent Federated's activities contribute to such losses.
JHLICO, the Series, and the subject Portfolio are hereby expressly put on
notice of the limitation of liability as set forth in the Declaration of Trust
of Federated and agree that the obligations assumed by Federated pursuant to
this Agreement will be limited in any case (except as otherwise provided in
section 1(e)(vi) of this Agreement) to Federated and its assets; and JHLICO, the
Series, and the Subject Portfolio shall not seek satisfaction of any such
obligation (except as may be otherwise required to effect section 1(e)(vi) of
this Agreement) from the shareholders trustees officers, or employees of
Federated, or any of them.
8. PRICING
JHLICO, the Series and the Subject Portfolio hereby acknowledge that
Federated is not responsible for pricing portfolio Securities and that JHLICO,
the Series, the subject Portfolio will rely on the pricing agent of the Series
for prices of Securities for any purposes. Federated shall comply with the fair
pricing procedures of the Series as provided to Federated from time to time.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
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Subject Portfolio on June 1, 2000 and, with respect to any additional Subject
Portfolio, on the date of receipt by the Series of notice from Federated in
accordance with Paragraph 1(b) hereof that it is willing to serve with respect
to such Portfolio. Unless terminated as herein provided, this Agreement shall
remain in full force and effect for two years from the date hereof with respect
to the initial Subject Portfolio and, with respect to each additional Subject
Portfolio, until two years following the date on which such Portfolio becomes a
Subject Portfolio hereunder, and shall continue in full force and effect
thereafter with respect to each Subject Portfolio only so long as such
continuance with respect to any such Portfolio is specifically approved at least
annually (a) by either the Board of Trustees of the Series or by vote of a
majority of the outstanding voting shares of such Portfolio, and (b) in either
event by the vote of a majority of the Board of Trustees of the Series who are
not parties to this Agreement or "interested persons" of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
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Any approval of this Agreement by the holders of a majority of the
outstanding shares of any Subject Portfolio shall be effective to continue this
Agreement with respect to any such Portfolio notwithstanding (A) that this
Agreement has not been approved by the holders of a majority of the outstanding
shares of any other Portfolio affected hereby, and (B) that this Agreement has
not been approved by the vote of a majority of the outstanding shares of the
Series, unless such approval shall be required by any other applicable law or
otherwise. The terms "assignment," "vote of a majority of the outstanding
shares" and "interested person," when used in this Agreement, shall have the
respective meanings specified in the 1940 Act and rules thereunder.
(b) Termination. This Agreement may be terminated with respect to any
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Subject Portfolio at any time, without payment of any penalty, by the Series
pursuant to a vote of the Trustees of the Series or a vote of a majority of the
outstanding shares of such Portfolio, which termination shall be effective
immediately upon delivery of written notice thereof to Federated and JHLICO.
This Agreement may be terminated by Federated on at least ninety days' prior
written notice to the Series and JHLICO, and may be terminated by JHLICO on at
least ninety days' prior written notice to the Series and Federated.
(c) Automatic Termination. This Agreement shall automatically and
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immediately terminate in the event of its assignment or if the Investment
Management Agreement is terminated.
10. SERVICES NOT EXCLUSIVE; USE OF FEDERATED'S NAME AND LOGO.
The services of Federated to the Series are not to be deemed exclusive and
it shall be free to render similar services to others so long as its services
hereunder are not impaired thereby. It is specifically understood that partners,
officers and employees of Federated and of its subsidiaries and affiliates may
continue to engage in providing portfolio management services and advice to
other investment companies, whether or not registered, and other investment
advisory clients.
During the term of this Agreement, subject to Federated's consent (which
consent shall not be unreasonably withheld and which may be presumed unless an
objection is made to a proposed use as hereinafter provided), JHLICO and the
Series shall have the non-exclusive and non-transferable right to use
Federated's name and logo in all materials relating to the Subject Portfolio,
including all prospectuses, proxy statements, reports to shareholders, sales
literature and other written materials prepared for distribution to shareholders
of the Series or the public. However, prior to printing or distributing of any
materials which refer to Federated, JHLICO shall consult with Federated and
shall furnish to Federated a copy of such materials. Federated agrees to
cooperate with JHLICO and to review such materials within a reasonable period of
time following receipt. JHLICO shall not print or distribute such materials if
Federated reasonably objects in writing, within five (5) business days of its
receipt of such copy (or such other time as may be mutually agreed), to the
manner in which its name and logo are to be used.
11. AVOIDANCE OF INCONSISTENT POSITION.
In connection with the purchase and sale of portfolio securities of the
Subject Portfolio, Federated and its partners, officers and employees will not
act as principal or agent or receive any commission. Nothing in this Agreement,
however, shall preclude the combination of orders
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for the sale or purchase of portfolio securities of the Subject Portfolio with
those for other accounts managed by Federated or its affiliates, if orders are
allocated in a manner deemed equitable by Federated among the accounts and at a
price approximately averaged.
12. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing. No amendment of this
Agreement shall be effective with respect to any Portfolio until approved
specifically by (a) the Board of Trustees of the Series, or by vote of a
majority of the outstanding shares of that Portfolio, and (b) by vote of a
majority of those trustees of the Series who are not interested persons of any
party to this Agreement cast in person at a meeting called for the purpose of
voting on such approval.
13. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Series hereunder shall
not be binding upon any of the trustees, shareholders, officers, agents or
employees of the Series personally, but only bind the trust property of the
Series, as provided in the Series' Declaration of Trust.
14. NOTICES
Notices and other communications required or permitted under this
Agreement shall be in writing, shall be deemed to be effectively delivered when
actually received, and may be delivered by US mail (first class, postage
prepaid), by facsimile transmission, by hand or by commercial overnight delivery
service, addressed as follows:
SUB-INVESTMENT MANAGER: Federated Investment Management Company
Federated Investors Tower
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxxx
Fax #: (000) 000-0000
JHLICO: Xxxx Xxxxxxx Life Insurance Company
000 Xxxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Fax #: 000-000-0000
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SERIES: Xxxx Xxxxxxx Variable Series Trust I
000 Xxxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Fax #: 000-000-0000
15. GOVERNING LAW.
This agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act and
rules thereunder.
16. ASSIGNMENT.
This Agreement may not be assigned by any party, either in whole or in
part, without the prior written consent of the other parties; provided, however,
that any assignment that results in a change of actual control or management of
the sub-investment manager or of the investment manager of the Subject Portfolio
(within the meaning of Rule 2a-6 under the 0000 Xxx) shall terminate this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day first set forth above.
ATTEST: XXXX XXXXXXX VARIABLE SERIES
TRUST I
By:_________________________
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Name: Xxxxxxx X. Xxx Xxxx
Title: Chairman
ATTEST: XXXX XXXXXXX LIFE INSURANCE
COMPANY
By:_________________________
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Name: Xxxxxx X. Xxxxxxx
Title: Vice President
ATTEST: FEDERATED INVESTMENT MANAGEMENT
COMPANY
By:_________________________
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Name: J. Xxxxxxxxxxx Xxxxxxx
Title: President
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SCHEDULE I
FEES
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Current Net Assets Under Management Sub-Advisory Fee
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On the first $25,000,000 30 basis points (0.30%) per annum
On the next $25,000,000 25 basis points (0.25%) per annum
On the next $100,000,000 20 basis points (0.20%) per annum
On amounts over $150,000,000 15 basis points (0.15%) per annum
