SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT (the "Agreement") made as of this 3rd day of March,
2017 by and between Xxxxxx Associates Inc., a California corporation with its
principal place of business at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx,
XX 00000-0000 (the "Adviser"), and Sprucegrove Investment Management Ltd., a
Canadian corporation with its principal place of business at 000 Xxxxxxxxxx
Xxx., Xxxxx 0000, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, pursuant to authority granted to the Adviser by the Board of
Trustees (the "Board") of THE KP FUNDS (the "Trust") on behalf of the series set
forth on Schedule A to this Agreement (the "Fund") and pursuant to the
provisions of the Investment Advisory Agreement dated as of December 18, 2013
between the Adviser and the Fund (the "Management Agreement"), the Adviser has
selected the Sub-Adviser to act as investment sub-adviser of the Fund and to
provide certain related services, as more fully set forth below, and to perform
such services under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, the Adviser and the Sub-Adviser do hereby agree as follows:
1. THE SUB-ADVISER'S SERVICES.
(a) DISCRETIONARY INVESTMENT MANAGEMENT SERVICES. The Sub-Adviser shall act
as investment sub-adviser with respect to the Fund. In such capacity, the
Sub-Adviser shall, subject to the supervision of the Adviser and the Board,
regularly provide the Fund with investment research, advice and supervision and
shall furnish continuously an investment program for such Fund assets as may be
allocated by the Adviser to the Sub-Adviser (the "Assets"), consistent with the
investment objectives and policies of the Fund and any investment guidelines
established and modified from time to time by the Adviser and communicated in
writing to the Sub-Adviser. The Sub-Adviser shall determine, from time to time,
which investments shall be purchased for the Fund and which such securities
shall be held or sold by the Fund, subject always to the provisions of the
Trust's Agreement and Declaration of Trust, By-Laws and its registration
statement on Form N-1A (the "Registration Statement") under the Investment
Company Act of 1940, as amended (the "1940 Act"), and under the Securities Act
of 1933, as amended (the "1933 Act"), covering Fund shares, as filed with the
Securities and Exchange Commission (the "Commission"), and to the investment
objectives, policies and restrictions of the Fund, as each of the same shall be
from time to time in effect, and to any investment guidelines established by the
Adviser as referred to above and provided to the Sub-Adviser in writing. To
carry out such obligations, the Sub-Adviser shall exercise full discretion and
shall be empowered to act for the Fund in the same manner and with the same
force and effect as the Fund itself might or could do with respect to purchases,
sales or other transactions, as well as with respect to all other such things
necessary or
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incidental to the furtherance or conduct of such purchases, sales or other
transactions. Notwithstanding the foregoing, the Sub-Adviser shall, upon
written instructions from the Adviser, effect such portfolio transactions for
the Fund as the Adviser may from time to time direct; provided however, that
the Sub-Adviser shall not be responsible for any such portfolio transactions
effected upon written instructions from the Adviser. No reference in this
Agreement to the Sub-Adviser having full discretionary authority over the
Fund's investments shall in any way limit the right of the Adviser, in its sole
discretion, to establish or revise policies in connection with the management
of the Fund's assets or to otherwise exercise its right to control the overall
management of the Fund's assets. The Sub-Adviser shall have no responsibility
for filing proofs of claim on behalf of the Fund with respect to class actions
relating to any Assets; however, the Sub-Adviser agrees that it shall promptly
provide the Adviser with any and all documentation or information relating to
such litigation that it receives.
(b) COMPLIANCE. The Sub-Adviser agrees to comply with the requirements of
the 1940 Act, the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Commodity Exchange Act and the respective rules and regulations
thereunder, as applicable, as well as with all other applicable federal and
state laws, rules, regulations and case law that relate to the services and
relationships described hereunder and to the conduct of its business as a
registered investment adviser. With respect to the Assets as defined in Section
1(a) herein, the Sub-Adviser also agrees to comply with the objectives, policies
and restrictions set forth in the Registration Statement, as amended or
supplemented, of the Fund, and with any policies, guidelines, instructions and
procedures approved by the Board or the Adviser and provided to the Sub-Adviser
in writing. The Adviser agrees to provide the Sub-Adviser, with as much advance
notice as is reasonably practicable, information regarding any change in (i) the
Fund's objectives, policies or restrictions; (ii) any policies, guidelines,
instructions and procedures pertaining to the Fund; (iii) the Trust's Agreement
and Declaration of Trust or By-Laws; and (iv) the Trust's compliance policies
and procedures. The Sub-Adviser shall be responsible for compliance with any of
the aforementioned changes only following written notice thereof. In selecting
the Fund's portfolio securities and performing the Sub-Adviser's obligations
hereunder, the Sub-Adviser shall cause the Fund to comply with the
diversification and source of income requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company. The Sub-Adviser shall maintain compliance
procedures that it reasonably believes are adequate to ensure the compliance
with the foregoing. No supervisory activity undertaken by the Adviser shall
limit the Sub-Adviser's responsibility for any of the foregoing. The Adviser
acknowledges that the Sub-Adviser's responsibilities are limited to those
related to the management of the Assets, and that the Sub-Adviser is not
responsible for compliance, qualification or other matters related to those
portions of the Fund which are not subject to this Agreement.
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(c) PROXY VOTING. Pursuant to Board authority, the Adviser has the
authority to determine how proxies with respect to securities that are held by
the Fund shall be voted, and the Adviser may delegate the authority and
responsibility to vote proxies for the Fund's securities to the Sub-Adviser. So
long as proxy voting authority for the Fund has been delegated to the
Sub-Adviser, the Adviser shall provide such assistance to the Sub-Adviser with
respect to the voting of proxies for the Fund as the Sub-Adviser may from time
to time reasonably request, and the Adviser shall promptly forward to the
Sub-Adviser any information or documents necessary for the Sub-Adviser to
exercise its proxy voting responsibilities. The Sub-Adviser shall carry out such
responsibility in accordance with any instructions that the Board or the Adviser
shall provide from time to time, and at all times in a manner consistent with
Rule 206(4)-6 under the Advisers Act and its fiduciary responsibilities to the
Trust. The Sub-Adviser shall provide the Adviser with a copy of its written
proxy voting policies and procedures and as such may be amended from time to
time. The Sub-Adviser shall provide periodic reports and keep such records
relating to proxy voting as the Adviser and the Board may reasonably request or
as may be necessary for the Fund to comply with the 1940 Act and other
applicable law. Any such delegation of proxy voting responsibility to the
Sub-Adviser may be revoked or modified by the Board or the Adviser at any time
upon notice.
Unless and until otherwise directed by the Adviser or the Board, the
Sub-Adviser shall be responsible for voting the Fund's proxies and exercising
all other applicable rights of the Fund as a security holder in connection with
corporate actions or other transactions relating to the Fund's portfolio
holdings. The Sub-Adviser is authorized to instruct the Fund's custodian and/or
broker(s) to forward promptly to the Sub-Adviser or designated service provider
copies of all proxies and shareholder communications relating to securities
held in the portfolio of a Fund (other than materials relating to legal
proceedings against the Fund). The Sub-Adviser may also instruct the Fund's
custodian and/or broker(s) to provide reports of holdings in the portfolio of
the Fund. The Sub-Adviser has the authority to engage a service provider to
assist with administrative functions related to voting Fund proxies. The Trust
shall direct the Fund's custodian and/or broker(s) to provide any assistance
requested by the Sub-Adviser in facilitating the use of a service provider. In
no event shall the Sub-Adviser have any responsibility to vote proxies that are
not received on a timely basis. The Trust acknowledges that the Sub-Adviser,
consistent with the Sub-Adviser's written proxy voting policies and procedures,
may refrain from voting a proxy if, in the Sub-Adviser's discretion, refraining
from voting would be in the best interests of the Fund and its shareholders.
(d) RECORDKEEPING. The Sub-Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the Fund,
except as otherwise provided herein or as may be necessary for the Sub-Adviser
to supply to the Adviser, the Trust or its Board the information required to be
supplied under this Agreement.
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The Sub-Adviser shall maintain separate books and detailed records of all
matters pertaining to the Assets required by Rule 31a-1 under the 1940 Act
(other than those records being maintained by the Adviser, or any administrator
custodian or transfer agent appointed by the Fund) relating to its
responsibilities provided hereunder with respect to the Fund, and shall preserve
such records for the periods and in a manner prescribed therefore by Rule 31a-2
under the 1940 Act (the "Fund Books and Records"). The Fund Books and Records
shall be available to the Adviser and the Board promptly upon request and shall
be delivered to the Trust in a form requested by the Adviser, which may include
an electronic format, upon the termination of this Agreement and shall, upon
request, be available promptly during any day the Trust is open for business.
(e) HOLDINGS INFORMATION AND PRICING. The Sub-Adviser shall provide regular
reports regarding the Fund's holdings, and may, on its own initiative, furnish
the Adviser, the Trust and its Board from time to time with whatever information
the Sub-Adviser believes is appropriate for this purpose. The Sub-Adviser agrees
to notify the Adviser and the Board promptly if the Sub-Adviser reasonably
believes that the value of any security held by a Fund may not reflect fair
value. The Sub-Adviser agrees to provide upon request any pricing information of
which the Sub-Adviser is aware to the Adviser, Trust, its Board and/or any Fund
pricing agent to assist in the determination of the fair value of any Fund
holdings for which market quotations are not readily available or as otherwise
required in accordance with the 1940 Act or the Fund valuation procedures for
the purpose of calculating the Trust's net asset value in accordance with
procedures and methods established by the Board.
(f) COOPERATION WITH AGENTS OF THE ADVISER AND THE TRUST. The Sub-Adviser
agrees to cooperate with and provide reasonable assistance to the Adviser, the
Trust and any Trust custodian or foreign sub-custodians, any Trust pricing
agents and all other agents and representatives of the Adviser and the Trust
with respect to such information regarding the Fund as such entities may
reasonably request from time to time in the performance of their obligations,
provide prompt responses to reasonable requests made by such persons and
establish appropriate interfaces with each so as to promote the efficient
exchange of information and compliance with applicable laws and regulations. The
Sub-Adviser shall make its officers and employees available to the Adviser from
time to time to review any current or proposed investment guidelines for the
Fund and to consult with the Adviser with respect to the Fund's investment
matters.
(g) CONSULTATION WITH OTHER SUB-ADVISERS. In performance of its duties and
obligations under this Agreement, the Sub-Adviser shall not consult with any
other sub-adviser to the Fund or a sub-adviser to a portfolio that is under
common control with the Fund concerning transactions for the Fund, except as
permitted by the policies and procedures of the Fund. The Sub-Adviser shall not
provide investment advice to any assets of the Fund other than the Assets.
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2. CODE OF ETHICS. The Sub-Adviser has adopted a written code of ethics
that it reasonably believes complies with the requirements of Rule 17j-1 under
the 1940 Act, which it has provided to the Adviser and the Trust. The
Sub-Adviser shall ensure that its Access Persons (as defined in the
Sub-Adviser's Code of Ethics) comply in all material respects with the
Sub-Adviser's Code of Ethics, as in effect from time to time. Upon request, the
Sub-Adviser shall provide the Trust with (i) a copy of the Sub-Adviser's current
Code of Ethics, as in effect from time to time, and (ii) a certification that it
has adopted procedures reasonably necessary to prevent Access Persons from
engaging in any conduct prohibited by the Sub-Adviser's Code of Ethics.
Annually, the Sub-Adviser shall furnish a written report, which complies with
the requirements of Rule 17j-1, concerning the Sub-Adviser's Code of Ethics to
the Adviser and the Trust's Board. The Sub-Adviser shall respond to requests for
information from the Adviser and the Trust as to violations of the Code by
Access Persons and any sanctions imposed by the Sub-Adviser on such Access
Persons. The Sub-Adviser shall promptly notify the Adviser and the Trust of any
material violation of the Code, whether or not such violation relates to a
security held by any Fund.
3. INFORMATION AND REPORTING. The Sub-Adviser shall provide the Adviser,
the Trust, and their respective officers with such periodic reports concerning
the obligations the Sub-Adviser has assumed under this Agreement as the Adviser
and the Trust may from time to time reasonably request.
(a) NOTIFICATION OF BREACH OR SIGNIFICANT CHANGES / COMPLIANCE
REPORTS. The Sub-Adviser shall notify the Trust's Chief Compliance Officer
and Adviser as soon as reasonably practicable upon detection of (i) any
material failure to manage any Fund in accordance with its investment
objectives and policies or any applicable law; or (ii) any material breach
of any of the Fund's or the Adviser's policies, guidelines or procedures
that directly relate to management of the Assets or to the sub-advisory
services provided by the Sub-Adviser to the Fund hereunder. The Sub-Adviser
shall notify the Adviser as soon as practicable of (i) any significant
changes in its investment strategy, asset allocation or other matters
affecting its management of the Assets; or (ii) any changes to the senior
investment management personnel primarily responsible for the investment or
servicing of the Assets which include portfolio managers and relationship
managers. In addition, the Sub-Adviser shall provide a quarterly report
regarding the Fund's compliance with its investment objectives and
policies, applicable law, including, but not limited to the 1940 Act and
Subchapter M of the Code, and the Fund's and the Adviser's policies,
guidelines or procedures as applicable to the Sub-Adviser's obligations
under this Agreement. The Sub-Adviser acknowledges and agrees that the
Adviser may, in its discretion, provide such quarterly compliance
certifications to the Board. The Sub-Adviser agrees to correct any such
failure promptly and to take any action that the Board and/or the Adviser
may reasonably request in connection with any such breach. Upon request,
the Sub-Adviser shall also provide the officers of the Trust with
supporting certifications in connection with such certifications of Fund
financial statements and disclosure controls pursuant to the Xxxxxxxx-Xxxxx
Act. The Sub-Adviser will promptly notify the Trust in the event (i) the
Sub-Adviser is served or otherwise receives notice of
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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 (excluding class action suits in which a Fund is a
member of the plaintiff class by reason of the Fund's ownership of shares
in the defendant) or the compliance by the Sub-Adviser with the federal or
state securities laws or (ii) an actual change in control of the
Sub-Adviser resulting in an "assignment" (as defined in the 1940 Act) has
occurred or is otherwise proposed to occur.
(b) INSPECTION. Upon reasonable request, the Sub-Adviser agrees to
make its records and premises (including the availability of the
Sub-Adviser's employees for interviews) to the extent that they relate to
the conduct of services provided to the Fund or the Sub-Adviser's conduct
of its business as an investment adviser reasonably available for
compliance audits by the Adviser or the Trust's officers, employees,
accountants or counsel; in this regard, the Trust and the Adviser
acknowledge that the Sub-Adviser shall have no obligation to make available
proprietary information unrelated to the services provided to the Fund or
any information related to other clients of the Sub-Adviser, except to the
extent necessary for the Adviser to confirm the absence of any conflict of
interest and compliance with any laws, rules or regulations in the
management of the Fund.
(c) BOARD AND FILINGS INFORMATION. The Sub-Adviser will also provide
the Adviser and Trust with any information reasonably requested regarding
its management of the Fund required for any meeting of the Board, or for
any shareholder report, Form N-CSR, Form N-Q, Form N-PX, Form N-SAR,
amended registration statement, proxy statement, or prospectus supplement
to be filed by the Trust with the Commission. The Sub-Adviser will make its
officers and employees reasonably available to meet with the Board from
time to time on due notice to review its investment management services to
the Fund in light of current and prospective economic and market conditions
and shall furnish to the Board such information as may reasonably be
necessary in order for the Board to evaluate this Agreement or any proposed
amendments thereto.
(d) TRANSACTION INFORMATION. The Sub-Adviser shall furnish to the
Adviser and the Trust such information concerning portfolio transactions as
may be necessary to enable the Adviser, Trust or their designated agents to
perform such compliance testing on the Fund and the Sub-Adviser's services
as the Adviser and the Trust may, in their sole discretion, determine to be
appropriate. The provision of such information by the Sub-Adviser to the
Adviser, Trust or their designated agents in no way relieves the
Sub-Adviser of its own responsibilities under this Agreement.
4. BROKERAGE.
(a) PRINCIPAL TRANSACTIONS. In connection with purchases or sales of
securities for the account of a Fund, neither the Sub-Adviser nor any of
its directors, officers or
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employees will act as a principal or agent or receive any commission except
as permitted by the 1940 Act.
(b) PLACEMENT OF ORDERS. The Sub-Adviser shall arrange for the placing
of all orders for the purchase and sale of securities for a Fund's account
with brokers or dealers selected by the Sub-Adviser. In the selection of
such brokers or dealers and the placing of such orders, subject to the
other provisions of this paragraph, the Sub-Adviser is directed at all
times to seek for a Fund the best execution available under the
circumstances, taking into account factors such as price, size of order and
type of transaction, difficulty of execution, scope and quality of
brokerage services provided and the financial responsibility and operations
of the broker. It is expected that the Sub-Adviser will seek competitive
commission rates generally although it is understood that the Sub-Adviser
will not necessarily pay the lowest commission rate available on each
transaction. It is also understood that it may be desirable for the Fund
that the Sub-Adviser have access to brokerage and research services
provided by brokers who may execute brokerage transactions at a higher cost
to the Fund than may result when allocating brokerage to other brokers,
consistent with section 28(e) of the 1934 Act and any Commission staff
interpretations thereof. Therefore, the Sub-Adviser is authorized to place
orders for the purchase and sale of securities for the Fund with such
brokers if the Sub-Adviser determines, in good faith, that such amount of
commissions is reasonable in relation to the value of such brokerage or
research services provided in terms of a particular Fund transaction or the
Sub-Adviser's overall responsibilities to the Fund and its other clients,
and that the total commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long-term. This practice is
subject to review by the Adviser and the Board from time to time with
respect to the extent and continuation of this practice. It is understood
that the services provided by such brokers may be useful to the Sub-Adviser
in connection with its or its affiliates' services to other clients.
(c) AGGREGATED TRANSACTIONS AND TRANSACTIONS FOR OTHER ACCOUNTS. On
occasions when the Sub-Adviser deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients of the
Sub-Adviser, the Sub-Adviser may, to the extent permitted by applicable law
and regulations, aggregate the order for securities to be sold or
purchased. In such event, the Sub-Adviser will allocate securities or
futures contracts so purchased or sold, as well as the expenses incurred in
the transaction, in the manner the Sub-Adviser reasonably considers to be
equitable and consistent with its fiduciary obligations to a Fund and to
such other clients under the circumstances. In addition, the Adviser
represents that it and the Trust understand that the Sub-Adviser may give
advice and take action with respect to any of its other clients or for its
own account which may differ from the timing or nature of action taken by
the Sub-Adviser with respect to the Fund. Nothing in this Agreement imposes
upon the Sub-Adviser any obligation to purchase or sell or to recommend for
purchase or sale, with respect to the Fund, any security or other
instrument which the Sub-Adviser or its partners, officers,
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employees or affiliates may purchase or sell for its or their own account(s) or
for the account of any other client.
(d) AFFILIATED BROKERS. The Sub-Adviser or any of its affiliates may
act as broker in connection with the purchase or sale of securities or other
investments for a Fund, subject to: (a) the requirement that the Sub-Adviser
seek to obtain best execution and price, as described in Section 4(b) above,
within the policy guidelines determined by the Board and set forth in a Fund's
current Registration Statement; (b) the provisions of the 1940 Act; (c) the
provisions of the Advisers Act; (d) the provisions of the 1934 Act; and (e)
other provisions of applicable law. These brokerage services are not within the
scope of the duties of the Sub-Adviser under this Agreement. Subject to the
requirements of applicable law and any procedures adopted by the Board, the
Sub-Adviser or its affiliates may receive brokerage commissions, fees or other
remuneration from a Fund for these services in addition to the Sub-Adviser's
fees for services under this Agreement.
5. CUSTODY. Nothing in this Agreement shall permit the Sub-Adviser to take
or receive physical possession of cash, securities or other investments of a
Fund.
6. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser will bear its own
costs of providing services hereunder. Other than as herein specifically
indicated, the Sub-Adviser shall not be responsible for a Fund's or the
Adviser's expenses, including brokerage and other expenses incurred in placing
orders for the purchase and sale of securities and other investment instruments.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) PROPERLY REGISTERED. The Sub-Adviser is registered as an investment
adviser under the Advisers Act, and will remain so registered for the duration
of this Agreement. The Sub-Adviser is not prohibited by the Advisers Act or the
1940 Act from performing the services contemplated by this Agreement, and to the
best knowledge of the Sub-Adviser, there is no proceeding or investigation that
is reasonably likely to result in the Sub-Adviser being prohibited from
performing the services contemplated by this Agreement. The Sub-Adviser agrees
to promptly notify the Trust of the occurrence of any event that would
disqualify the Sub-Adviser from serving as an investment adviser to an
investment company. The Sub-Adviser is in compliance in all material respects
with all applicable federal and state law in connection with its investment
management operations.
(b) ADV DISCLOSURE. The Sub-Adviser has provided the Trust with a copy
of Part I of its Form ADV as most recently filed with the Commission and
its Part II as most recently updated and will, promptly after filing any
amendment to its Form ADV with the Commission or updating its Part II,
furnish a copy of such amendments or updates to the Trust. The information
contained in the Sub-Adviser's Form ADV is accurate and complete in all
material respects and does not omit to state any material fact necessary in
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order to make the statements made, in light of the circumstances under
which they were made, not misleading.
(c) FUND DISCLOSURE DOCUMENTS. The Sub-Adviser has reviewed and will
in the future review, the portions of the following documents that pertain
to the Sub-Adviser and the services provided by the Sub-Adviser hereunder,
which have been or shall be provided to the Sub-Adviser in writing: the
Registration Statement, summary prospectus, prospectus, statement of
additional information, periodic reports to shareholders, reports and
schedules filed with the Commission (including any amendment, supplement or
sticker to any of the foregoing) and advertising and sales material
relating to the Fund (collectively the "Disclosure Documents"). The
Sub-Adviser represents and warrants that such portions of the Disclosure
Documents relating to the Sub-Adviser, to the extent revised to reflect any
comments thereon provided by the Sub-Adviser and not otherwise revised,
contain or will contain, as of the date that the Sub-Adviser provides any
comments thereon, no untrue statement of any material fact and do not and
will not omit any statement of material fact required to be stated therein
or necessary to make the statements therein not misleading.
(d) USE OF THE NAMES "KP" AND "XXXXXX." The Sub-Adviser has the right
to use the names "KP" and "Xxxxxx" in connection with its services to the
Trust and the Trust and the Adviser have the right to use the name
"Sprucegrove" in connection with the management and operation of a Fund.
The Sub-Adviser is not aware of any threatened or existing actions, claims,
litigation or proceedings that would adversely affect or prejudice the
rights of the Sub-Adviser or the Trust to use the name "Sprucegrove" in the
manner contemplated herein.
(e) INSURANCE. The Sub-Adviser maintains errors and omissions
insurance coverage in an appropriate amount and shall provide prior written
notice to the Trust (i) of any material changes in its insurance policies
or insurance coverage; or (ii) if any material claims will be made on its
insurance policies. Furthermore, the Sub-Adviser shall, upon reasonable
request, provide the Trust with any information it may reasonably require
concerning the amount of or scope of such insurance.
(f) NO DETRIMENTAL AGREEMENT. The Sub-Adviser represents and warrants
that it has no arrangement or understanding with any party, other than the
Trust, that would influence the decision of the Sub-Adviser with respect to
its selection of securities for a Fund, and that all selections shall be
done in accordance with what is in the best interest of the Fund.
(g) CONFLICTS. The Sub-Adviser shall act honestly, in good faith and
in the best interests of the Trust including requiring any of its personnel
with knowledge of Fund activities to place the interest of the Fund first,
ahead of their own interests, in all personal trading scenarios that may
involve a conflict of interest with the Fund, consistent with its fiduciary
duties under applicable law.
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(h) REPRESENTATIONS. The representations and warranties in this
Section 7 shall be deemed to be made on the date this Agreement is executed
and at the time of delivery of the quarterly compliance report required by
Section 3(a), whether or not specifically referenced in such report.
8. SUB-ADVISER'S COMPENSATION. The Adviser shall cause the Fund to pay
the Sub-Adviser, as compensation for the Sub-Adviser's services hereunder,
a fee, determined as described in Schedule A that is attached hereto and
made a part hereof. Such fee shall be computed daily and paid not less than
monthly in arrears by the Fund.
The Sub-Adviser will be compensated based on the portion of Fund
assets allocated to the Sub-Adviser by the Adviser. The method for
determining net assets of the Fund for purposes hereof shall be the same as
the method for determining net assets for purposes of establishing the
offering and redemption prices of Fund shares as described in the Fund's
prospectus. In the event of termination of this Agreement, the fee provided
in this Section shall be computed on the basis of the period ending on the
last business day on which this Agreement is in effect subject to a pro
rata adjustment based on the number of days elapsed in the current month as
a percentage of the total number of days in such month.
9. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder,
the Sub-Adviser is and shall be an independent contractor and, unless
otherwise expressly provided herein or otherwise authorized in writing,
shall have no authority to act for or represent the Fund, the Trust or the
Adviser in any way or otherwise be deemed to be an agent of the Fund, the
Trust or the Adviser. If any occasion should arise in which the Sub-Adviser
gives any advice to its clients concerning the shares of a Fund, the
Sub-Adviser will act solely as investment counsel for such clients and not
in any way on behalf of the Fund.
10. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically
terminate, without the payment of any penalty, (i) in the event of its
assignment (as defined in section 2(a)(4) of the 0000 Xxx) or (ii) in the
event of the termination of the Management Agreement; provided that such
termination shall not relieve the Adviser or the Sub-Adviser of any
liability incurred hereunder.
This Agreement may not be added to or changed orally and may not be
modified or rescinded except by a writing signed by the parties hereto and
in accordance with the 1940 Act, when applicable.
11. DURATION AND TERMINATION.
This Agreement shall become effective as of the date executed and shall
remain in full force and effect continually thereafter, subject to renewal
as provided in Section 11(d) and unless terminated automatically as set
forth in Section 10 hereof or until terminated as follows:
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(a) The Trust may cause this Agreement to terminate either (i) by vote
of its Board or (ii) with respect to the Fund, upon the affirmative vote of
a majority of the outstanding voting securities of the Fund; or
(b) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the
Sub-Adviser; or
(c) The Sub-Adviser may at any time terminate this Agreement by not
more than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Adviser; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Trustees or by the vote
of a majority of the outstanding voting securities of the Fund and (ii) a
vote of a majority of such Trustees who are not interested persons of the
Trust, the Adviser or the Sub-Adviser, cast in person at a meeting called
for the purpose of voting on such approval; provided, however, that 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
of this Agreement as provided herein, the Sub-Adviser may continue to serve
hereunder as to the Fund in a manner consistent with the 1940 Act and the
rules and regulations thereunder; and
(e) Termination of this Agreement pursuant to this Section shall be
without payment of any penalty.
In the event of termination of this Agreement for any reason, the
Sub-Adviser shall, immediately upon notice of termination or on such later
date as may be specified in such notice, cease all activity on behalf of
the Fund and with respect to any of its assets, except as expressly
directed by the Adviser or as otherwise required by any fiduciary duties of
the Sub-Adviser under applicable law. In addition, the Sub-Adviser shall
deliver the Fund's Books and Records to the Adviser by such means and in
accordance with such schedule as the Adviser shall direct and shall
otherwise cooperate, as reasonably directed by the Adviser, in the
transition of portfolio asset management to any successor of the
Sub-Adviser, including the Adviser.
12. CERTAIN DEFINITIONS. FOR THE PURPOSES OF THIS AGREEMENT:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940
Act, subject, however, to such exemptions as may be granted by the
Commission under the 1940 Act or any interpretations of the Commission
staff.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions
as may be
11
granted by the Commission under the 1940 Act or any interpretations of the
Commission staff.
13. LIABILITY OF THE SUB-ADVISER.
(a) The Sub-Adviser shall have responsibility for the accuracy and
completeness (and liability for the lack thereof) of statements in the
Fund's Disclosure Documents that are applicable or relate to the
Sub-Adviser; provided, that the Sub-Adviser has had the opportunity to
review any applicable Disclosure Document, that it incorporates any
revisions provided by the Sub-Adviser in accordance with Section 7(c) and
that the Sub-Adviser has had the opportunity to approve the final version
of such Disclosure Document.
(b) The Sub-Adviser shall be liable to the Fund for any loss
(including transaction costs) incurred by the Fund as a result of any
investment made by the Sub-Adviser in contravention of: (i) any investment
policy, guideline or restriction set forth in the Registration Statement or
as approved by the Board from time to time and provided in writing or made
available electronically to the Sub-Adviser; or (ii) applicable law,
including but not limited to the 1940 Act and the Code (including but not
limited to the Fund's failure to satisfy the diversification or source of
income requirements of Subchapter M of the Code (the investments described
in this subsection (b) collectively are referred to as "Improper
Investments"). For the avoidance of doubt, the Sub-Adviser's
responsibilities hereunder are limited to those in respect of the Assets.
Notwithstanding Section 13(b)(i) above, in the event that the Sub-Adviser
at any point determines that any investment policy, guideline or
restriction or any other instruction provided to the Sub-Adviser hereunder
is in contravention of applicable law or regulation as advised by legal
counsel to the Sub-Adviser, the Sub-Adviser reserves the right to refuse to
act upon such investment policy, guideline, restriction or other
instruction. Such refusal to act shall not be considered a breach of this
Agreement and Sub-Adviser shall have no liability in connection with such
determination or refusal to act. In such event, the Sub-Adviser will
promptly notify the Adviser and the Fund.
(c) The Sub-Adviser shall indemnify and hold harmless the Trust, each
affiliated person of the Trust within the meaning of Section 2(a)(3) of the
1940 Act, and each person who controls the Trust within the meaning of
Section 15 of the 1933 Act (any such person, an "Indemnified Party")
against any and all losses, claims, damages, expenses or liabilities
(including the reasonable cost of investigating and defending any alleged
loss, claim, damage, expense or liability and reasonable counsel fees
incurred in connection therewith) to which any such person may become
subject under the 1933 Act, the 1934 Act, the 1940 Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon: (i) a breach by the
Sub-Adviser of this Agreement or of the representations and warranties made
by the Sub-Adviser herein; (ii) any Improper Investment; (iii) any untrue
statement or alleged untrue
12
statement of a material fact applicable to the Sub-Adviser contained in any
Disclosure Document or the omission or alleged omission from a Disclosure
Document of a material fact applicable to the Sub-Adviser required to be
stated therein or necessary to make the statements therein not misleading,
provided, that the Sub-Adviser has had the opportunity to review such
Disclosure Document, that it incorporates any revisions provided by the
Sub-Adviser in accordance with Section 7(c) and that the Sub-Adviser has
had the opportunity to approve the final version of such Disclosure
Document; or (iv) the Sub-Adviser's performance or non-performance of its
duties hereunder; provided, however, that nothing herein shall be deemed to
protect any Indemnified Party who is a Trustee or officer of the Trust
against any liability to the Trust or to its shareholders to which such
Indemnified Party would otherwise be subject by reason or willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office with the Trust; and
provided further, however, that the Sub-Adviser's obligations hereunder
shall be reduced to the extent that the claims against, or the losses,
damages or liabilities experienced by the Indemnified Party, are caused by
or are otherwise directly or indirectly related to the Indemnified Party's
own willful misfeasance, bad faith or gross negligence, or to the reckless
disregard of its duties under this Agreement.
(d) The Adviser shall indemnify and hold harmless the Sub-Adviser, and
each person who controls the Sub-Adviser within the meaning of Section 15
of the 1933 Act (any such person, a "Sub-Adviser Indemnified Party")
against any and all losses, claims, damages, expenses or liabilities
(including the reasonable cost of investigating and defending any alleged
loss, claim, damage, expense or liability and reasonable counsel fees
incurred in connection therewith) to which any such person may become
subject under the 1933 Act, the 1934 Act, the 1940 Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon: (i) a material breach by
the Adviser of this Agreement or the representations and warranties made by
the Adviser herein; (ii) a violation of applicable law by the Adviser
relating to the subject matter of this Agreement; (iii) any action or
omission taken by the Sub-Adviser in good faith in accordance with an
instruction or direction provided by the Adviser; (iv) any untrue statement
or alleged untrue statement contained in any Disclosure Document or the
omission or alleged omission from a Disclosure Document of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, other than a statement or omission applicable to the
Sub-Adviser described in Section 13(c)(iii) above; or (v) the Adviser's
willful misfeasance, bad faith, or gross negligence in the performance of
its obligations and duties under this Agreement; provided, however, that
the Adviser's obligations hereunder shall be reduced to the extent that the
claims against, or the losses, damages or liabilities experienced by the
Sub-Adviser Indemnified Party, are caused by or are otherwise directly or
indirectly related to the Sub-Adviser Indemnified Party's own willful
misfeasance, bad faith or gross negligence, or to the reckless disregard of
its duties under this Agreement.
13
14. ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
15. LIMITATION OF LIABILITY. The parties to this Agreement acknowledge and
agree that all litigation liability of the Trust on behalf of the Fund arising
hereunder, whether direct or indirect, and of any and every nature whatsoever
shall be satisfied solely out of the assets of the affected Fund and that no
Trustee, officer or holder of shares of beneficial interest of the Fund shall be
personally liable for any of the foregoing liabilities. The Trust's Certificate
of Trust, as amended from time to time, is on file in the Office of the
Secretary of State of the Commonwealth of Massachusetts. Such Certificate of
Trust and the Trust's Agreement and Declaration of Trust describe in detail the
respective responsibilities and limitations on liability of the Trustees,
officers, and holders of shares of beneficial interest.
16. CHANGE IN THE SUB-ADVISER'S OWNERSHIP. The Sub-Adviser agrees that it
shall notify the Trust of any anticipated or otherwise reasonably foreseeable
change in the ownership of the Sub-Adviser that would result in an "assignment"
(as defined in the 1940 Act) within a reasonable time prior to such change being
effected.
17. CONFIDENTIALITY. No party to this Agreement will disclose or use any
records or information obtained pursuant to this Agreement in any manner
whatsoever, except as expressly authorized in this Agreement or, with respect to
the Sub-Adviser, as may reasonably be required to execute transactions on behalf
of the Fund or, with respect to the Adviser, as may reasonably be required to
provide its services to the Fund. The parties will keep confidential any
non-public information obtained directly as a result of this service
relationship; provided that (i) the Adviser may make any disclosure to its
employees, affiliates, the Trust, the Fund, or the Board, legal counsel or
auditors or other service providers to the Fund, as the Adviser may reasonably
determine necessary, and (ii) the Sub-Adviser may make any disclosure to its
employees, affiliates, legal counsel, or auditors or other service providers to
the Sub-Adviser, as the Sub-Adviser may reasonably determine necessary; provided
that no such information may be used for any trading or investment purposes
unrelated to management of the Fund. Notwithstanding the foregoing, any party
may disclose such non-public information if (a) such information is or hereafter
otherwise is known by the receiving party or becomes ascertainable from public
or published information or trade sources, (b) such disclosure is required by
applicable federal, state or other law or regulation, (c) such disclosure is
required or requested by regulatory or self-regulatory authorities or judicial
process, (d) such disclosure is reasonably required by legal counsel or auditors
of the party (or of the Trust, the Fund, the Board or affiliates of the Adviser)
in connection with the performance of their professional services, (e) such
disclosure is otherwise contemplated by this Agreement, or (f) the disclosing
party obtains the permission of the other party. Sub-Adviser shall not disclose
information regarding characteristics of the Fund or the Assets, trading
history, portfolio holdings, performance information or any other related
14
information to any third party, except in compliance with the Trust's policies
on disclosure of portfolio holdings or as required by applicable law or
regulation.
18. JURISDICTION. This Agreement shall be governed by and construed in
accordance with the substantive laws of the Commonwealth of Massachusetts and
the Sub-Adviser consents to the jurisdiction of courts, both state or federal,
in Massachusetts, with respect to any dispute under this Agreement.
19. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
20. COUNTERPARTS. 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.
21. NOTICES. All notices hereunder shall be given in writing (and shall be
deemed to have been duly given) by delivery in person, by facsimile or by
electronic means (with corresponding personal, facsimile or electronic receipt
of such delivery), or by registered or certified mail (with return receipt
requested), or by reputable overnight delivery service (with evidence of receipt
to the parties), at the address of each as set forth below (or at such other
address, number or electronic address for a party as shall be specified by like
notice):
If to the Sub-Adviser, to:
Sprucegrove Investment Management Ltd
000 Xxxxxxxxxx Xxx., Xxxxx 0000
Xxxxxxx, Xxxxxxx
Xxxxxx M5H 3M7Attention: Xxxxxxx Xxxxxxx, Chief Legal Officer
Facsimile:000.000.0000
Email: XXxxxxxx@xxxxxxxxxxx.xx
Telephone: 416.363.5854 x260
If to the Adviser, to:
Xxxxxx Associates Inc.
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Vice President, Trust Advisory Group
Facsimile: 303.832.8230
Email: XXXX@XXXXXX.XXX
Telephone: 000.000.0000
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
on their behalf by their duly authorized officers as of the date first above
written.
XXXXXX ASSOCIATES INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------
Name: Xxxxxxx X. Xxxxx
Title: President and Director of Research
SPRUCEGROVE INVESTMENT MANAGEMENT LTD.
By: /s/ Xxxxxxx Xxxxx
-----------------
Name: Xxxxxxx Xxxxx
Title: Managing Director
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Name: Xxxxxxx Xxxxxxx
Title: Chief Legal Officer
16
SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
DATED MARCH 3, 2017 BETWEEN
XXXXXX ASSOCIATES INC.
AND
SPRUCEGROVE INVESTMENT MANAGEMENT LTD.
Each Fund will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered, a fee (the "Sub-Advisory Fee"), determined in accordance with
the calculation methodology set forth below.
[REDACTED]
17
