INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the
"Agreement") is made and entered into on the date hereafter set
forth between AMERICAN FIDELITY ASSURANCE COMPANY (the "Client"),
which is the investment adviser to the American Fidelity Dual
Strategy Fund, Inc. (the "Fund"), and XXXX INVESTMENT ADVISORS,
INC. (the "Investment Sub-Adviser").
1. APPOINTMENT OF INVESTMENT SUB-ADVISER. Effective on the
Effective Date, the Client hereby appoints Investment Sub-Adviser
to serve as investment adviser to the Client in respect of those
assets of the Fund specified in writing on or before the
Effective Date by the Client to be subject to this Agreement
(which assets, together with any assets which are added at a
subsequent date or which are received as a result of the sale,
exchange, or transfer of any of such assets are herein
collectively referred to as the "Investment Assets"). The
"Effective Date" shall be the Closing Date of the Reorganization,
as such terms are defined in that certain Agreement and Plan of
Reorganization dated _________, 1998 among the Client, the Fund
and American Fidelity Variable Annuity Fund A.
The Investment Sub-Adviser hereby accepts such appointment
and agrees to render the services and to assume the obligations
herein set forth, for the compensation herein provided.
2. THE INVESTMENT ASSETS. The Investment Assets shall consist
of such cash, stocks, bonds and other securities which, from time
to time, the Client places under the investment supervision of
the Investment Sub-Adviser and/or which shall become part of the
Investment Assets as a result of transactions therein or
otherwise. The Client may make additions to or withdrawals from
the Investment Assets in such amounts as the Client shall
determine.
3. CUSTODIANSHIP OF THE INVESTMENT ASSETS. The Investment
Assets have been deposited with Bank of Oklahoma, N.A. (the
"Custodian") and are maintained by the Custodian in safekeeping
on its premises, in a recognized clearing corporation, or in the
Federal Reserve book-entry system, in the name of the Fund, the
Custodian or the clearing corporation, or in the nominee name of
any of the foregoing. The Investment Sub-Adviser is hereby
authorized to give instructions to the Custodian with respect to
the consummation of transactions on behalf of the Client in the
Investment Assets, and the Custodian is hereby authorized to act
in response to instructions given by the Investment Sub-Adviser.
The Client agrees to take any other action and deliver any
certificates reasonably necessary to confirm the foregoing
authorization to the Custodian. The Client shall advise the
Investment Sub-Adviser if any other entity is appointed to serve
as Custodian for the Investment Assets prior to the date such
entity succeeds the Custodian. The term "Custodian" includes all
successors to the presently serving Custodian.
4. MANAGEMENT OF INVESTMENT ASSETS.
4.1 General Powers and Duties. So long as the Investment
Sub-Adviser's appointment under Section 1 hereof remains in
effect, the Investment Sub-Adviser shall, subject to the
provisions of Section 4.2 hereof, have complete discretion and
authority in the investment and reinvestment of the Investment
Assets and shall determine what securities or other property
shall be acquired, held, or disposed of and, subject to the
provisions of Section 4.4 hereof, what portion of the Investment
Assets shall be held uninvested. The Investment Sub-Adviser's
investment and reinvestment authority shall include, without
limitation, authority to purchase, sell, exchange, convert,
trade, and generally to deal in the Investment Assets. The
Investment Sub-Adviser shall have authority to direct the
Custodian with respect to the investment and management of the
Investment Assets.
The Investment Sub-Adviser's authority shall include the
exercise of all voting rights pertaining to the Investment
Assets. However, the Investment Sub-Adviser shall have no
obligation to exercise any particular voting rights unless the
Custodian or the Client shall have furnished the pertinent
proxies to the Investment Sub-Adviser a reasonable time prior to
the deadline before which such proxies are required to be
submitted. The Investment Sub-Adviser has the duty to maintain
accurate records as to any vote or action taken with respect to
any stock or other securities which are part of the Investment
Assets and to take such further action as may be necessary for
the Fund to participate fully in any transaction undertaken by
issuers of Investment Assets.
4.2 Investment Policy. Investment objectives, policies and
other guidelines for the management of Investment Assets,
including requirements as to diversification are set forth in
Exhibit A to this Agreement. The Investment Sub-Adviser shall
discharge its duties hereunder in accordance with said investment
guidelines as the same may be revised or supplemented from time
to time by the Client.
4.3 Prudence and Diversification. The Investment Sub-
Adviser shall discharge its duties hereunder at all times 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 an
enterprise of a like character and with like aims.
4.4 Minimum Liquidity Requirements. The Client shall give
the Investment Sub-Adviser reasonable advance notice of any cash
requirements from the Investment Assets, and the Investment Sub-
Adviser shall maintain in cash or cash equivalents sufficient
assets to meet such cash requirements.
4.5 Instructions to Securities Brokers and Dealers. The
Investment Sub-Adviser is hereby empowered to issue orders for
the purchase, sale or exchange of securities with respect to the
Investment Assets directly to a broker or dealer. The Investment
Sub-Adviser shall give the Custodian and the Client prompt
written notification of each such execution in accordance with
the provisions of Section 5.1 hereof, and the Investment Sub-
Adviser shall instruct the broker or dealer concerned to forward
a copy of the confirmation of the execution of such order to the
Custodian and the Client.
4.6 Selection of Securities Brokers and Dealers. The
Investment Sub-Adviser may select and employ securities brokers
and dealers to effect any securities transactions concerning the
investment management of the Investment Assets. In the selection
of such brokers and dealers by the Investment Sub-Adviser and the
placing of orders with them, the Investment Sub-Adviser shall use
its best efforts to obtain for the Investment Assets the most
favorable net price and execution available except to the extent
otherwise provided by Section 28(e) of the Securities Exchange
Act of 1934, as amended, or by other applicable law.
Notwithstanding anything in this Section 4.6 to the contrary, the
Client may instruct the Investment Sub-Adviser in writing to
engage securities brokers and dealers specified by the Client to
effect, with respect to the Investment Assets, securities
transactions, or particular securities transactions, and the
Investment Sub-Adviser shall act in accordance with such
instructions. The Investment Sub-Adviser shall not be
responsible or liable for any acts or omissions by any broker or
dealer selected pursuant to this Section 4.6 provided the
Investment Sub-Adviser has acted reasonably in the exercise of
due care in the selection of such broker or dealer and has not
otherwise participated in, directly or indirectly, such acts or
omissions by such broker or dealer.
4.7 Other Accounts of the Investment Sub-Adviser. It is
understood that the Investment Sub-Adviser performs investment
advisory services for various clients and accounts other than the
Client. The Investment Sub-Adviser may give advice and take
action in the performance of its duties with respect to any of
such other clients or accounts which may be the same as or differ
from the timing or nature of action taken with respect to the
Investment Assets, provided that the Investment Sub-Advisor
allocates to the Investment Assets, to the extent practicable,
opportunities to acquire or dispose of investments over a period
of time on a basis no less favorable than its allocation of such
opportunities to such other clients and accounts and seeks over a
period of time to obtain comparable execution of similar
transactions among its clients. It is understood that the
Investment Sub-Adviser shall not have any obligation to purchase
or sell, or to recommend for purchase or sale, for the Fund any
security which the Investment Sub-Adviser, its principals,
affiliates or employees may purchase or sell for its or their own
accounts or for the account of any other client, if in the
opinion of the Investment Sub-Adviser such transaction or
investment appears unsuitable, impractical or undesirable for the
Fund.
4.8 Limit of Liability. The Investment Sub-Adviser shall
act in good faith and shall not be liable for any error of
judgment or loss incurred by the Fund in connection with
recommendations or investments made by the Investment Sub-Adviser
in its management of the Investment Assets.
5. INFORMATION AND REPORTS.
5.1 Reports to Client. Initially, the Investment Sub-
Adviser shall submit a daily written report to the Client
promptly following the close of regular trading on the New York
Stock Exchange detailing the actions taken by the Investment Sub-
Adviser under this Agreement during such day. The report shall
contain such information in such form as the Client has
specified, or from time to time shall specify, to the Investment
Sub-Adviser. In addition, the Investment Sub-Adviser shall
provide such other reports on the performance of the Investment
Assets at such times, for such periods and in such form as the
Client shall reasonably request, taking into account the
Investment Sub-Adviser's ability to produce such reports without
undue burden to the Investment Sub-Adviser.
5.2 Records and Accounts. The Investment Sub-Adviser shall
keep accurate and detailed records and accounts of the Investment
Assets and of all receipts, disbursements, and other transactions
hereunder affecting the Investment Assets. All such records and
accounts, and all documents relating thereto shall be open at all
reasonable times and under reasonable conditions to inspection
and audit by any person or persons designated by the Client.
5.3 Exchange of Information. The Client and the Investment
Sub-Adviser agree to provide to each other such information as
the Investment Adviser or the Client, as the case may be, may
reasonably request to enable it to carry out its duties,
obligations, and responsibilities under this Agreement or
applicable law.
5.4 Information to be Confidential. All information and
advice furnished to or obtained by the Client or the Investment
Sub-Adviser under or in connection with this Agreement shall be
treated as confidential and shall not be disclosed to third
parties except as required by law, including the disclosure
obligations of an investment company to its securities holders
under the federal securities laws.
6. FEE PAYABLE TO INVESTMENT SUB-ADVISER. For services under
this Agreement, the Investment Sub-Adviser shall be entitled to
receive from the Client a fee in an amount equal to the greater
of (a) .095% of the current value of the Investment Assets as of
the close of the last trading day of March, June, September and
December (.38% on an annual basis) or (b) $12,500 per quarter
($50,000 on an annual basis). Such fee shall be payable in
arrears as soon as practicable, but not more than 10 business
days, after the last day of each calendar quarter.
7. REPRESENTATIONS BY CLIENT. The Client hereby represents and
warrants to the Investment Sub-Adviser that:
(a) Maryland Corporation. The Fund is a corporation
formed under the Maryland General Corporation Law.
(b) Investment Company. The Fund is registered with
the Securities and Exchange Commission (the "Commission") as an
open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "Investment
Company Act").
(c) Investment Adviser. The Client has been duly
appointed to serve as the investment adviser of the Fund.
(d) Delivery of Information. The Client will deliver
to the Investment Sub-Adviser, in writing, all of the
information, documents and instruments which the Investment Sub-
Adviser may reasonably request in order that it shall be able to
perform its duties hereunder.
(e) Approval of Agreement. This Agreement has been
approved by the Investment Committee of the Client, by the Board
of Directors of the Fund, including a majority of the members of
the Fund's Board of Directors who are not Interested Persons of
the Investment Sub-Adviser or the Fund and, prior to the
Effective Date, will be approved by a Majority Vote of
Shareholders. "Majority Vote of Shareholders" means, in
accordance with Section 2(a)(42) of the Investment Company Act,
the vote, at an annual or a special meeting of shareholders of
the Fund, duly called, (a) of 67% or more of the voting
securities present at such meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present
or represented by proxy, or (b) of more than 50% of the
outstanding voting securities of the Fund, whichever is less.
"Interested Persons" are those persons defined in Section
2(a)(19) of the Investment Company Act.
(f) Owner of Investment Assets. The Fund is the owner
of all Investment Assets which are the subject of this Agreement.
(g) Receipt by Client of Part II of Form ADV. The
Client acknowledges that it has received from the Investment Sub-
Adviser prior to or contemporaneously with the Client's execution
of this Agreement a copy of Part II of the Investment Sub-
Adviser's Form ADV as currently on file with the Commission under
the Investment Advisers Act of 1940, as amended (the "Investment
Advisers Act").
8. REPRESENTATIONS BY INVESTMENT SUB-ADVISER. The Investment
Sub-Adviser hereby represents and warrants to and agrees with the
Client that:
(a) Registration as Investment Adviser. The
Investment Sub-Adviser is and will be duly registered as an
"investment adviser" in accordance with the Investment Advisers
Act and with any other regulatory authorities pursuant to any
other applicable laws. The Investment Sub-Adviser is not subject
to any order of the Commission or any other regulatory authority
restricting its activities.
(b) Affiliated Brokers. Unless authorized in writing
by the Client, neither the Investment Sub-Adviser nor any parent,
subsidiary or related firm, individual or other entity related to
the Investment Sub-Adviser shall act as a securities broker with
respect to any purchases or sales of securities which may be made
on behalf of the Fund.
(c) Meetings with Client and Fund. A representative
of the Investment Sub-Adviser shall personally meet with the
Investment Committee of the Client or its designated
representative as reasonably requested by the Client to explain
the investment and management activities of the Investment Sub-
Adviser, and any reports related thereto, at such times as may be
mutually agreed by the Investment Sub-Adviser and the Client. In
addition, a representative of the Investment Sub-Adviser shall
attend the Fund's annual Board of Directors meetings and shall be
prepared to discuss the Investment Sub-Adviser's economic
outlook, investment strategy, individual holdings included in the
Investment Assets and such other related matters as the Board of
Directors shall request.
(d) Compliance With Laws. Nothing in this Agreement
shall be deemed to authorize the Investment Sub-Adviser to effect
any transactions in contravention of its fiduciary obligations,
duties or responsibilities under the Investment Advisers Act,
this Agreement or any other applicable federal or state laws or
regulations (including all applicable securities laws and regula-
tions) or the rules of any national securities exchange. The
Investment Sub-Adviser shall at all times in the performance of
its duties hereunder comply with the Investment Advisers Act and
such other laws, regulations and rules.
(e) Indemnification. In addition to any other rights
which the Client or the Fund may have against the Investment Sub-
Adviser, the Investment Sub-Adviser shall indemnify the Client
and the Fund and hold them harmless with respect to any loss or
damage, or costs or expenses suffered by them as a result of (i)
a breach by the Investment Sub-Adviser of this Agreement, or (ii)
the willful misfeasance, bad faith or gross negligence of the
Investment Sub-Adviser or any of its employees or agents acting
under its supervision or control to perform any of its
obligations and duties, or by reason of its reckless disregard of
its obligations and duties, under this Agreement, the Investment
Advisers Act or any other applicable law or regulation; provided,
the Investment Sub-Adviser shall have no responsibility or
liability for any loss incurred by reason of any act or omission
of the Client, a custodian or any broker-dealer.
9. MISCELLANEOUS.
9.1 Amendment. This Agreement may be amended at any time
by mutual agreement of the Client and the Investment Sub-Adviser,
provided that any material amendment shall have been approved by
a Majority Vote of Shareholders, by the Fund's Board of Directors
and by the vote of a majority of the members of the Fund's Board
of Directors who are not Interested Persons of the Investment
Sub-Adviser or the Fund cast in person at a meeting called for
the purpose of voting on such approval.
9.2 Term. This Agreement shall have an initial term of one
year from the Effective Date and thereafter shall continue from
year to year if continuance is approved at least annually by (a)
the Fund's Board of Directors or a Majority Vote of Shareholders
and (b) the vote of a majority of the members of the Fund's Board
of Directors who are not Interested Persons of the Investment
Sub-Adviser or of the Fund cast in person at a meeting called for
the purpose of voting on such approval.
9.3 Termination. This Agreement shall automatically
terminate in the event of its assignment, within the meaning of
Section 15(a) of the Investment Company Act, unless an order of
the Commission is issued exempting such assignment. This
Agreement may be terminated at any time, on 30 days' written
notice to the Investment Sub-Adviser, without payment of any
penalty, by the Client, the Board of Directors of the Fund or by
a Majority Vote of Shareholders. If at any time the
representation contained in Section 8(a) hereof ceases to be
true, this Agreement shall terminate forthwith without penalty or
payment of any kind by the Client. The Investment Sub-Adviser
may terminate this Agreement at any time upon 30 days' prior
written notice to the Client. If this Agreement shall terminate
at any time other than at the end of a calendar quarter, the
Investment Sub-Adviser shall be entitled to receive the fee set
forth in Section 6 hereof for the portion of the quarter elapsed
prior to the date of termination, prorated on a daily basis.
9.4 Errors and Omissions Policy. The Investment Sub-
Adviser agrees that, at its sole expense, it will maintain an
errors and omissions insurance policy that covers the acts,
errors and omissions by the Investment Sub-Adviser, its employees
or agents during the term of this Agreement. Upon request of the
Client, the Investment Sub-Adviser shall provide evidence of such
insurance.
9.5 Governing Law; Severability. This Agreement and its
performance shall be governed by and construed in accordance with
the applicable laws of the United States and, to the extent
permitted by such laws, with the laws of the State of Oklahoma.
In case any provision of this Agreement shall be held illegal or
invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Agreement but shall be
fully severable, and the Agreement shall be construed and
enforced as if such illegal or invalid provision had not been
included herein.
9.6 Notices. Unless the parties otherwise agree, all
notices, instructions and advice with respect to matters contem-
plated by this Agreement shall be in writing and effective when
received, and delivery shall be made personally, by registered or
certified mail, return receipt requested, overnight courier or
confirmed facsimile and addressed as follows:
Client: American Fidelity Assurance Company
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: ___________________
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Investment
Sub-Adviser: Xxxx Investment Advisors, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party may change any of the above information by providing
notice to the other party in the manner set forth above. All
reports required to be delivered by the Investment Sub-Adviser to
the Client pursuant to Section 5.1 of this Agreement shall be
delivered in the manner specified from time to time by the
Client. Any communications from the Investment Sub-Adviser of a
routine nature may be delivered by U.S. mail to the person(s)
specified by the Client.
In recognition of their acceptance of the terms and
conditions of this Agreement, the Client and the Investment Sub-
Adviser hereby execute this Agreement by their duly authorized
representatives this _____ day of ________________, 1998.
CLIENT: AMERICAN FIDELITY ASSURANCE
COMPANY
By
Name: Xxxx X. Xxx
Title: President
INVESTMENT SUB-ADVISER: XXXX INVESTMENT ADVISORS, INC.
By
Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief
Executive Officer
