Exhibit (d)(74)
SUB-ADVISORY AGREEMENT
AGREEMENT made this 17th day of January, 2002, by and between ZURICH
XXXXXXX INVESTMENTS, INC., a Delaware corporation (the "Adviser") and DREMAN
VALUE MANAGEMENT, L.L.C., a Delaware limited liability company (the
"Sub-Adviser").
WHEREAS, XXXXXXX VARIABLE SERIES, II, a Massachusetts business trust
(the "Fund") is a management investment company registered under the Investment
Company Act of 1940 ("the Investment Company Act");
WHEREAS, the Fund has retained the Adviser to render to it investment
advisory and management services with regard to the Fund, including the series
known as the Xxxxxxx Small Cap Value Portfolio which, as of the effective date
of this Agreement, will be renamed the SVS Dreman Small Cap Value Portfolio (the
"Small Cap Series"), pursuant to an Investment Management Agreement (the
"Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the Sub-Adviser to
render investment advisory and management services for the Small Cap Series and
the Sub-Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. Appointment of Sub-Adviser.
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(a) The Adviser hereby employs the Sub-Adviser to manage the
investment and reinvestment of the assets of the Small Cap Series in accordance
with the applicable investment objectives, policies and limitations and subject
to the supervision of the Adviser and the Board of Trustees of the Fund for the
period and upon the terms herein set forth, and to place orders for the purchase
or sale of portfolio securities for the Small Cap Series account with brokers or
dealers selected by the Sub-Adviser; and, in connection therewith, the
Sub-Adviser is authorized as the agent of the Small Cap Series to give
instructions to the Custodian and Accounting Agent of the Fund as to the
deliveries of securities and payments of cash for the account of the Small Cap
Series. In connection with the selection of such brokers or dealers and the
placing of such orders, the Sub-Adviser is directed to seek for the Small Cap
Series best execution of orders. Subject to such policies as the Board of
Trustees of the Fund determines and subject to satisfying the requirements of
Section 28(e) of the Securities Exchange Act of 1934, the Sub-Adviser shall not
be deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the Small Cap
Series to pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Sub-Adviser
determined in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities with respect to the clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion. The
Adviser recognizes that all research services and research that the Sub-Adviser
receives are available for all clients of the Sub-Adviser, and that the Small
Cap Series and other clients of the Sub-Adviser may benefit thereby. The
investment of funds shall be subject to all applicable restrictions of the
Agreement and Declaration of Trust of the Fund as may from time to time be in
force.
(b) The Sub-Adviser accepts such employment and agrees during the
period of this Agreement to render such investment management services in
accordance with the applicable investment objectives, policies and limitations
set out in the Fund's prospectus and Statement of Additional
Information, as amended from time to time, to furnish related office facilities
and equipment and clerical, bookkeeping and administrative services for the
Small Cap Series, and to assume the other obligations herein set forth for the
compensation herein provided. The Sub-Adviser shall assume and pay all of the
costs and expenses of performing its obligations under this Agreement. The
Sub-Adviser shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund, the Small Cap Series
or the Adviser in any way or otherwise be deemed an agent of the Fund, the Small
Cap Series or the Adviser.
(c) The Sub-Adviser will keep the Adviser, for itself and on behalf
of the Fund, informed of developments materially affecting the Fund or the Small
Cap Series and shall, on the Sub-Adviser's own initiative and as reasonably
requested by the Adviser, for itself and on behalf of the Fund, furnish to the
Adviser from time to time whatever information the Adviser reasonably believes
appropriate for this purpose.
(d) The Sub-Adviser shall provide the Adviser with such investment
portfolio accounting and shall maintain and provide such detailed records and
reports as the Adviser may from time to time reasonably request, including
without limitation, daily processing of investment transactions and periodic
valuations of investment portfolio positions as required by the Adviser, monthly
reports of the investment portfolio and all investment transactions and the
preparation of such reports and compilation of such data as may be required by
the Adviser to comply with the obligations imposed upon it under the Management
Agreement. The Sub-Adviser agrees to install in its offices computer equipment
or software, as provided by the Adviser at its expense, for use by the
Sub-Adviser in performing its duties under this Sub-Advisory Agreement,
including inputting on a daily basis that day's portfolio transactions in the
Small Cap Series.
(e) The Sub-Adviser shall maintain and enforce adequate security
procedures with respect to all materials, records, documents and data relating
to any of its responsibilities pursuant to this Agreement including all means
for the effecting of securities transactions.
(f) The Sub-Adviser agrees that it will provide to the Adviser or
the Fund promptly upon request reports and copies of such of its investment
records and ledgers with respect to the Small Cap Series as appropriate to
assist the Adviser and the Fund in monitoring compliance with the Investment
Company Act and the Investment Advisers Act of 1940 (the "Advisers Act"), as
well as other applicable laws. The Sub-Adviser will furnish the Fund's Board of
Trustees such periodic and special reports with respect to the Small Cap Series
as the Adviser or the Board of Trustees may reasonably request, including
statistical information with respect to the Small Cap Series' securities.
(g) In compliance with the requirements of Rule 31a-3 under the
Investment Company Act, the Sub-Adviser hereby agrees that any records that it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly any such records upon the Fund's or the Adviser's request,
although the Sub-Adviser may, at the Sub-Adviser's own expense, make and retain
copies of such records. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the Investment Company Act any records
with respect to the Sub-Adviser's duties hereunder required to be maintained by
Rule 31a-1 under the Investment Company Act to the extent that the Sub-Adviser
prepares and maintains such records pursuant to this Agreement and to preserve
the records required by Rule 204-2 under the Advisers Act for the period
specified in that Rule.
(h) The Sub-Adviser agrees that it will immediately notify the
Adviser and the Fund in the event that the Sub-Adviser: (i) becomes subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Agreement; or (ii) is or expects to become
the subject of an administrative proceeding or enforcement action by the United
States Securities and Exchange Commission ("SEC") or other regulatory authority.
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(i) The Sub-Adviser agrees that it will immediately forward, upon
receipt, to the Adviser, for itself and as agent for the Fund, any
correspondence from the SEC or other regulatory authority that relates to the
Small Cap Series.
(j) The Sub-Adviser acknowledges that it is an "investment adviser"
to the Fund within the meaning of the Investment Company Act and the Advisers
Act.
(k) The Sub-Adviser shall be responsible for maintaining an
appropriate compliance program to ensure that the services provided by it under
this Agreement are performed in a manner consistent with applicable laws and the
terms of this Agreement. The Sub-Adviser agrees to provide such reports and
certifications regarding its compliance program as the Adviser or the Fund shall
reasonably request from time to time.
(l) The Sub-Adviser maintains a written Code of Ethics that complies
with the requirements of Rule 17j-1 under the Investment Company Act. The
Sub-Adviser certifies that it has adopted procedures reasonably necessary to
prevent its "access persons," as such term is defined in Rule 17j-1, from
violating the Code of Ethics. The Sub-Adviser shall notify the Board upon the
adoption of any material change to its Code of Ethics so that the Board,
including a majority of the Trustees who are not interested persons of the Fund,
may approve such change not later than six months after its adoption by the
Sub-Adviser, as required by Rule 17j-1. The Sub-Adviser also shall provide the
Fund with a copy of any amendments to its Code of Ethics that do not represent a
material change to such Code. Within 45 days of the end of each calendar year
while this Agreement is in effect (or more frequently if required by Rule 17j-1
or as the Fund may reasonably request), the Sub-Adviser shall provide the Board
with a written report that, as required by Rule 17j-1: (i) describes any issue
arising under the Sub-Adviser's Code of Ethics or procedures since the last
report to the Board, including, but not limited to, information about material
violations of the Code or procedures and sanctions imposed in response to the
material violations, and (ii) certifies that the Sub-Adviser has adopted
procedures reasonably necessary to prevent its access persons from violating its
Code of Ethics. Upon the written request of the Fund, the Sub-Adviser shall
permit the Fund to examine the reports to be made by the Sub-Adviser under Rule
17j-1(d) and the records the Sub-Adviser maintains pursuant to Rule 17j-1(f).
2. Compensation.
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For the services and facilities described herein, the Adviser will pay
to the Sub-Adviser, 15 days after the end of each calendar month, a sub-advisory
fee of 1/12 of an annualized rate of 0.375 of 1% of the average daily net assets
as defined below of the Small Cap Series for such month.
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.
3. Net Asset Value. The net asset value for the Small Cap Series shall
be calculated as the Board of Trustees of the Fund may determine from time to
time in accordance with the provisions of the Investment Company Act. On each
day when net asset value is not calculated, the net asset value of the Small Cap
Series shall be deemed to be the net asset value as of the close of business on
the last day on which such calculation was made for the purpose of the foregoing
computations.
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4. Duration and Termination.
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(a) This Agreement shall become effective with respect to the Small
Cap Series on the first business day following the date it is approved in the
manner required by the Investment Company Act and the rules and regulations
thereunder and shall remain in full force until June 30, 2007, unless sooner
terminated or not annually approved as hereinafter provided. Notwithstanding the
foregoing, this Agreement shall continue in force through June 30, 2007, and
from year to year thereafter, only as long as such continuance is specifically
approved at least annually and in the manner required by the Investment Company
Act and the rules and regulations thereunder, with the first annual renewal to
be coincident with the next renewal of the Management Agreement.
(b) This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Management Agreement. In
addition, the Adviser has the right to terminate this Agreement upon immediate
notice if the Sub-Adviser becomes statutorily disqualified from performing its
duties under this Agreement or otherwise is legally prohibited from operating as
an investment adviser.
(c) If a party breaches this Agreement in any material respect which
is not cured within sixty (60) days of the other party giving it written notice
of such breach, the other party may effect termination of this Agreement on
written notice to the defaulting party.
(d) This Agreement may be terminated at any time, without the
payment by the Fund of any penalty, by the Board of Trustees of the Fund, or by
vote of a majority of the outstanding voting securities of the Small Cap Series,
or by the Adviser. The Fund may effect termination of this Agreement by action
of the Board of Trustees of the Fund or by vote of a majority of the outstanding
voting securities of the Small Cap Series on sixty (60) days written notice to
the Adviser and the Sub-Adviser. The Adviser may effect termination of this
Agreement on sixty (60) days written notice to the Sub-Adviser.
(e) The Sub-Adviser may terminate this Agreement upon ninety (90)
days written notice to the Adviser.
(f) The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
(g) Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 2 earned prior to such termination.
(h) The provisions of Section 9 shall survive the termination of
this Agreement.
5. Representations and Warranties. The Sub-Adviser hereby represents
and warrants as follows:
(a) The Sub-Adviser is registered with the SEC as an investment
adviser under the Advisers Act, and such registration is current, complete
and in full compliance with all material applicable provisions of the
Advisers Act and the rules and regulations thereunder;
(b) The Sub-Adviser has all requisite authority to enter into,
execute, deliver and perform the Sub-Adviser's obligations under this
Agreement;
(c) The Sub-Adviser's performance of its obligations under this
Agreement does not conflict with any law, regulation or order to which the
Sub-Adviser is subject; and
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(d) The Sub-Adviser has reviewed the portion of (i) the registration
statement filed with the SEC, as amended from time to time for the Fund
("Registration Statement"), and (ii) the Fund's prospectus and supplements
thereto, in each case in the form received from the Adviser with respect
to the disclosure about the Sub-Adviser and the Small Cap Series of which
the Sub-Adviser has knowledge (the "Sub-Adviser and Small Cap
Information") and except as advised in writing to the Adviser such
Registration Statement, prospectus and any supplement contain, as of its
date, no untrue statement of any material fact of which the Sub-Adviser
has knowledge and do not omit any statement of a material fact of which
the Sub-Adviser has knowledge which was required to be stated therein or
necessary to make the statements contained therein not misleading.
6. Covenants. The Sub-Adviser hereby covenants and agrees that, so long
as this Agreement shall remain in effect:
(a) The Sub-Adviser shall maintain the Sub-Adviser's registration as
an investment adviser under the Advisers Act, and such registration shall
at all times remain current, complete and in full compliance with all
material applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(b) The Sub-Adviser's performance of its obligations under this
Agreement shall not conflict with any law, regulation or order to which
the Sub-Adviser is then subject;
(c) The Sub-Adviser shall at all times comply with the Advisers Act
and the Investment Company Act, and all rules and regulations thereunder,
and all other applicable laws and regulations, and the Registration
Statement, prospectus and any supplement and with any applicable
procedures adopted by the Fund's Board of Trustees, provided that such
procedures are substantially similar to those applicable to similar funds
for which the Board of Trustees of the Fund is responsible and that such
procedures are identified in writing to the Sub-Adviser;
(d) The Sub-Adviser shall promptly notify the Adviser and the Fund
upon the occurrence of any event that might disqualify or prevent the
Sub-Adviser from performing its duties under this Agreement. The
Sub-Adviser further agrees to notify the Adviser of any changes that would
cause the Registration Statement or prospectus for the Fund to contain any
untrue statement of a material fact or to omit to state a material fact
which is required to be stated therein or is necessary to make the
statements contained therein not misleading, in each case relating to
Sub-Adviser and Small Cap Information; and
(e) For the entire time this Agreement is in effect and for a period
of two years thereafter, the Sub-Adviser shall maintain a claims made bond
issued by a reputable fidelity insurance company against larceny and
embezzlement, covering each officer and employee of the Sub-Adviser, at a
minimum level of $3 million which provides coverage for acts or alleged
acts which occurred during the period of this Agreement.
7. Use of Names.
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(a) The Sub-Adviser acknowledges and agrees that the names Xxxxxxx
Variable Series II, Zurich, Xxxxxxx and Xxxxxx (whether used by themselves or in
combination with other words), and abbreviations or logos associated with those
names, are the valuable property of the Adviser and its affiliates; that the
Fund, the Adviser and their affiliates have the right to use such names,
abbreviations and logos; and that the Sub-Adviser shall use the names Xxxxxxx
Variable Series II, Zurich, Xxxxxxx and Xxxxxx, and associated abbreviations and
logos, only in connection with the Sub-Adviser's performance of its duties
hereunder. Further, in any communication with the public and in any marketing
communications
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of any sort, the Sub-Adviser agrees to obtain prior written approval from the
Adviser before using or referring to Xxxxxxx Variable Series II, Zurich,
Xxxxxxx, Xxxxxx or SVS Dreman Small Cap Value Portfolio or any abbreviations or
logos associated with those names; provided that nothing herein shall be deemed
to prohibit the Sub-Adviser from referring to the performance of the Small Cap
Series in the Sub-Adviser's marketing material as long as such marketing
material does not constitute "sales literature" or "advertising" for the Small
Cap Series, as those terms are used in the rules, regulations and guidelines of
the SEC and the National Association of Securities Dealers, Inc.
(b) The Adviser acknowledges that "Dreman" is distinctive in
connection with investment advisory and related services provided by the
Sub-Adviser, the "Dreman" name is a property right of the Sub-Adviser, and the
"Dreman" name as used in the name of the Small Cap Series is understood to be
used by the Fund upon the conditions hereinafter set forth; provided that the
Fund may use such name only so long as the Sub-Adviser shall be retained as the
investment sub-adviser of the Small Cap Series pursuant to the terms of this
Agreement.
(c) The Adviser acknowledges that the Fund and its agents may use
the "Dreman" name in the name of the Small Cap Series for the period set forth
herein in a manner not inconsistent with the interests of the Sub-Adviser and
that the rights of the Fund and its agents in the "Dreman" name are limited to
their use as a component of the Small Cap Series name and in connection with
accurately describing the activities of the Small Cap Series, including use with
marketing and other promotional and informational material relating to the Small
Cap Series. In the event that the Sub-Adviser shall cease to be the investment
sub-adviser of the Small Cap Series, then the Fund at its own or the Adviser's
expense, upon the Sub-Adviser's written request: (i) shall cease to use the
Sub-Adviser's name as part of the name of the Small Cap Series or for any other
commercial purpose (other than referring to the Small Cap Series' former name in
the Fund's Registration Statement, proxy materials and other Fund documents to
the extent required by law, referring to the Fund's performance record for the
period for which the Sub-Adviser subadvised the Adviser in respect of the Fund
and, for a reasonable period, using the name in informing others of the name
change); and (ii) shall use its best efforts to cause the Fund's officers and
trustees to take any and all actions which may be necessary or desirable to
effect the foregoing and to reconvey to the Sub-Adviser all rights which the
Fund may have to such name. Adviser agrees to take any and all reasonable
actions as may be necessary or desirable to effect the foregoing and the
Sub-Adviser agrees to allow the Fund and its agents a reasonable time to
effectuate the foregoing.
(d) The Sub-Adviser hereby agrees and consents to the use of the
Sub-Adviser's name upon the foregoing terms and conditions.
8. Standard of Care. Except as may otherwise be required by law, and
except as may be set forth in paragraph 9, the Sub-Adviser shall not be liable
for any error of judgment or of law or for any loss suffered by the Fund, the
Small Cap Series or the Adviser in connection with the matters to which this
Agreement relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Sub-Adviser in the performance of its
obligations and duties or by reason of its reckless disregard of its obligations
and duties under this Agreement.
9. Indemnifications.
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(a) The Sub-Adviser agrees to indemnify and hold harmless the Adviser
and the Fund against any losses, expenses, claims, damages or liabilities (or
actions or proceedings in respect thereof), to which the Adviser or the Fund may
become subject arising out of or based on the breach by the Sub-Adviser of any
provisions of this Agreement or any wrongful action by the Sub-Adviser;
provided, however, that the Sub-Adviser shall not be liable under this paragraph
in respect of any loss, expense, claim, damage or liability to the extent that a
court having jurisdiction shall have determined by a final
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judgment, or independent counsel agreed upon by the Sub-Adviser and the Adviser
or the Fund, as the case may be, shall have concluded in a written opinion, that
such loss, expense, claim, damage or liability resulted primarily from the
Adviser's or the Fund's willful misfeasance, bad faith or gross negligence or by
reason of the reckless disregard by the Adviser or the Fund of its duties. The
foregoing indemnification shall be in addition to any rights that the Adviser or
the Fund may have at common law or otherwise. The Sub-Adviser's agreements in
this paragraph shall, upon the same terms and conditions, extend to and inure to
the benefit of each person who may be deemed to control the Adviser or the Fund,
be controlled by the Adviser or the Fund, or be under common control with the
Adviser or the Fund and their affiliates, trustees, officers, employees and
agents. The Sub-Adviser's agreement in this paragraph shall also extend to any
of the Fund's, Small Cap Series', and Adviser's successors or the successors of
the aforementioned affiliates, trustees, officers, employees or agents.
(b) The Adviser agrees to indemnify and hold harmless the Sub-Adviser
against any losses, expenses, claims, damages or liabilities (or actions or
proceedings in respect thereof), to which the Sub-Adviser may become subject
arising out of or based on the breach by the Adviser of any provisions of this
Agreement or the Management Agreement, or any wrongful action by the Adviser or
its affiliates in the distribution of the Fund's shares, or any wrongful action
by the Fund other than wrongful action that was caused by the breach by the
Sub-Adviser of the provisions of this Agreement; provided, however, that the
Adviser shall not be liable under this paragraph in respect of any loss,
expense, claim, damage or liability to the extent that a court having
jurisdiction shall have determined by a final judgment, or independent counsel
agreed upon by the Adviser and the Sub-Adviser shall have concluded in a written
opinion, that such loss, expense, claim, damage or liability resulted primarily
from the Sub-Adviser's willful misfeasance, bad faith or gross negligence or by
reason of the reckless disregard by the Sub-Adviser of its duties. The foregoing
indemnification shall be in addition to any rights that the Sub-Adviser may have
at common law or otherwise. The Adviser's agreements in this paragraph shall,
upon the same terms and conditions, extend to and inure to the benefit of each
person who may be deemed to control the Sub-Adviser, be controlled by the
Sub-Adviser or be under common control with the Sub-Adviser and to each of the
Sub-Adviser's and each such person's respective affiliates, directors, officers,
employees and agents. The Adviser's agreements in this paragraph shall also
extend to any of the Sub-Adviser's successors or the successors of the
aforementioned affiliates, directors, officers, employees or agents.
(c) Promptly after receipt by a party indemnified under paragraph
9(a) or 9(b) above of notice of the commencement of any action, proceeding, or
investigation for which indemnification will be sought, such indemnified party
shall promptly notify the indemnifying party in writing; but the omission so to
notify the indemnifying party shall not relieve it from any liability which it
may otherwise have to any indemnified party unless such omission results in
actual material prejudice to the indemnifying party. In case any action or
proceeding shall be brought against any indemnified party, and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, individually or jointly with any other
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of any action or
proceeding, the indemnifying party shall not be liable to the indemnified party
for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof other than reasonable costs of
investigation. If the indemnifying party does not elect to assume the defense of
any action or proceeding, the indemnifying party on a monthly basis shall
reimburse the indemnified party for the reasonable legal fees and other costs of
defense thereof. Regardless of whether or not the indemnifying party shall have
assumed the defense of any action or proceeding, the indemnified party shall not
settle or compromise the action or proceeding without the prior written consent
of the indemnifying party, which shall not be unreasonably withheld.
10. Survival. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
be thereby affected.
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11. Notices. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
12. Governing Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of New York without giving
effect to the rules of conflict of laws in the State of New York to the extent
those rules would require or permit the application of another jurisdiction's
laws.
13. Miscellaneous.
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(a) The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(b) Terms not defined herein shall have the meaning set forth in the
Fund's prospectus.
(c) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of the day and year first above written.
ZURICH XXXXXXX INVESTMENTS, INC.
By:________________________________
Title:_____________________________
DREMAN VALUE MANAGEMENT, L.L.C.
By:_________________________________
Title:________________________________
FOR THE PURPOSE OF ACCEPTING ITS
OBLIGATIONS UNDER SECTION 7
HEREIN ONLY
XXXXXXX VARIABLE SERIES II
By:_____________________________
Title:__________________________
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