ANNEX B
XXXX XXXXXXX CAPITAL SERIES
Xxxx Xxxxxxx Large Cap Select Fund
Sub-Investment Management Contract
Dated , 2003
XXXX XXXXXXX ADVISERS, LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
XXXX XXXXXXX CAPITAL SERIES
Xxxx Xxxxxxx Large Cap Select Fund
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
SHAY ASSETS MANAGEMENT, INC
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Sub-Investment Management Contract
----------------------------------
Ladies and Gentlemen:
Xxxx Xxxxxxx Capital Series (the "Trust") has been organized
as a business trust under the laws of The Commonwealth of Massachusetts to
engage in the business of an investment company. The Trust's shares of
beneficial interest may be classified into series, each series representing the
entire undivided interest in a separate portfolio of assets. Series may be
established or terminated from time to time by action of the Board of Trustees
of the Trust. The Board of Trustees has established several series of the Trust,
including Xxxx Xxxxxxx Large Cap Select Fund (the "Fund").
The Trustees have selected Xxxx Xxxxxxx Advisers LLC (the
"Adviser") to provide overall investment advice and management for the Fund, and
to provide certain other services, under the terms and conditions provided in
the Investment Management Contract, dated as of the date hereof, between the
Trust, the Fund and the Adviser (the "Investment Management Contract").
The Adviser and the Trustees have selected Shay Assets
Management, Inc. (the "Sub-Adviser") to provide the Adviser and the Fund with
the investment management and advisory services set forth below, and the
Sub-Adviser is willing to provide such advice and services, subject to the
review of the Trustees and overall supervision of the Adviser, under the terms
and conditions set forth in this agreement (the "Agreement"). The Sub-Adviser
hereby represents and warrants that it is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
Accordingly, the Trust, on behalf of the Fund, and the Adviser agree with the
Sub-Adviser as follows:
1. Investment Services.
-------------------
(a) The Sub-Adviser provide to the Fund continuing and suitable investment
advice with respect to investments, consistent with the investment
policies, objectives and restrictions of the Fund as set forth in the
Fund's Prospectus and Statement of Additional Information. In the
performance of the Sub-Adviser's duties hereunder, subject always to (i)
the Trust's and the Fund's organizational documents as amended from time to
time and (ii) the limitations set forth in the Registration Statement of
the Trust, on behalf of the Fund, as in effect from time to time under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), the Sub-Adviser will have
investment discretion with respect to the Fund. In performing the
Sub-Adviser's obligations hereunder, the Sub-Adviser shall comply with the
provisions of the Declaration of Trust and By-laws, the 1940 Act, Advisers
Act, the 1933 Act, the Securities Exchange Act of 1934, as amended (the
"1934 Act"), the Commodity Exchange Act and the rules and regulations
promulgated under such statutes and the investment objective, policies and
restrictions of the Fund, as each of the same shall be from time to time in
effect as set forth in the Fund's then current Prospectus and Statement of
Additional Information. The Sub-Adviser shall cause the Fund to comply with
the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company,
excluding the provisions thereunder relating to the declaration and payment
of dividends. The Sub-Adviser shall also comply with such policies,
guidelines, procedures and instructions as the Adviser or the Trustees may
from time to time establish and deliver to the Sub-Adviser. No supervisory
activity undertaken by the Adviser shall limit the Sub-Adviser's
responsibility for the foregoing. No reference in this agreement to the
Sub-Adviser's discretionary authority over the Fund's investments shall in
any way limit the right of the Adviser, in its sole discretion, to
establish and revise policies in connection with the management of the
Fund's assets or otherwise exercise its right to control the overall
management of the Fund's assets.
(b) The Sub-Adviser will, at its own expense:
(i) furnish the Adviser and the Fund with advice and recommendations,
consistent with the investment policies, objectives and restrictions
of the Fund as set forth in the Fund's Prospectus and Statement of
Additional Information, with respect to the purchase, holding and
disposition of portfolio securities;
(ii) furnish the Adviser and the Fund with advice as to the manner in
which voting rights, subscription rights, rights to consent to
corporate action and any other rights pertaining to the Fund's assets
shall be exercised, as requested, the Fund having the responsibility
to exercise such voting and other rights;
(iii) furnish the Adviser and the Fund with such research, economic
and statistical data as the Adviser or the Fund may reasonably request
in connection with the Fund's investments and investment policies;
(iv) submit such reports relating to the valuation of the Fund's
securities as the Trustees or the Fund's Valuation Committee may
reasonably request and to monitor daily the value of all securities
held by the Fund and in particular the value of any security that is
priced at fair value in accordance with the Fund's valuation
procedures and immediately report to the Adviser any change in
circumstance that could affect such fair value;
(v) from time to time or at any time as reasonably requested by the
Adviser or the Trustees, make reports to the Adviser or the Trust of
the Sub-Adviser's performance of the foregoing services and the
compliance by the Fund with applicable statutory and regulatory
requirements relating to the management of the Fund's assets and the
Fund's investment objectives, policies and restrictions and upon
request, notice reasonable under the circumstances, to make the
Sub-Adviser's records and premises available for compliance audits by
the Adviser or the Fund's accountants or counsel;
(vi) subject to the supervision of the Adviser, maintain all books and
records with respect to the Fund's securities transactions required by
the 1940 Act, and preserve such records for the periods prescribed
therefor by the 1940 Act (the Sub-Adviser agrees that such records are
the property of the Trust and copies will be surrendered to the Trust
promptly upon request therefor);
(vii) cooperate with and provide reasonable assistance to the Adviser,
the Fund, the Fund's custodian and foreign sub-custodians, the Fund's
pricing agents and all other agents and representatives of the Fund
and the Adviser, furnish such information with respect to the Fund as
they 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; and
(viii) cooperate generally with the Fund and the Adviser to provide
information reasonably requested by the Adviser which is necessary for
the preparation of registration statements and periodic reports to be
filed with the Securities and Exchange Commission, including Form
N-1A, periodic statements, shareholder communications and proxy
materials furnished to holders of shares of the Fund, filings with
state "blue sky" authorities and with United States agencies
responsible for tax matters, and other reports and filings of like
nature; and
(c) The Sub-Adviser shall place all trades for the Fund through the
Adviser's trading desk. The Adviser shall have complete authority to
determine the brokers or dealers through which any trade by the Fund
is placed and as to the timing and manner of the execution of any such
trade, although the Sub-Adviser may give guidance.
2. Expenses Paid by the Sub-Adviser. The Sub-Adviser will pay the cost of
maintaining the staff and personnel necessary for it to perform its obligations
under this Agreement, the expenses of office rent, telephone, telecommunications
and other facilities it is obligated to provide in order to perform the services
specified in Section 1, and any other expenses incurred by it in connection with
the performance of its duties hereunder.
3. Expenses of the Fund Not Paid by the Sub-Adviser. The Sub-Adviser will
not be required to pay any expenses of the Fund which this Agreement does not
expressly make payable by the Sub-Adviser. In particular, and without limiting
the generality of the foregoing but subject to the provisions of Section 2, the
Sub-Adviser will not be required to pay under this Agreement:
(a) the compensation and expenses of Trustees and of independent
advisers, independent contractors, consultants, managers and other
agents employed by the Trust or the Fund other than through the
Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the Trust or
the Fund;
(c) the fees and disbursements of custodians and depositories of the
Trust or the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(d) taxes and governmental fees assessed against the Trust or the
Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Trust or
the Fund, except that the Sub-Adviser shall bear the costs of
providing the information referred to in Section 1(i) to the Adviser;
(f) brokers' commissions and underwriting fees; and
(g) the expense of periodic calculations of the net asset value of the
shares of the Fund.
4. Compensation of the Sub-Adviser. (a) Subject to Section 4(b), for all
services to be rendered, facilities furnished and expenses paid or assumed by
the Sub-Adviser as herein provided for the Fund, the Adviser will pay the
Sub-Adviser monthly, in arrears, within 5 business days after the end of each
month, a fee equal on an annual basis to the following percentages of the actual
management fee received by the Adviser from the Fund: (i) 45% of the investment
management fee with respect to the first $250,000,000 of the average daily net
asset value of the Fund; (ii) 40% of the investment management fee with respect
to the average daily net asset value of the Fund in excess of $250,000,000 up to
$500,000,000; (iii) 35 % of the investment management fee with respect to the
average daily net asset value of the Fund in excess of $500,000,000 up to
$750,000,000; (iv) 30% of the investment management fee with respect to the
average daily net asset value of the Fund in excess of $750,000,000 up to
$1,000,000,000; and (v) 25% of the investment management fee with respect to the
average daily net asset value of the Fund in excess of $1,000,000,000.
The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's Prospectus or otherwise consistent with the
1940 Act and the regulations promulgated thereunder. The Sub-Adviser will
receive a pro rata portion of such fee for any periods in which the Sub-Adviser
advises the Fund less than a full quarter. The Fund shall not be liable to the
Sub-Adviser for the Sub-Adviser's compensation hereunder. Calculations of the
Sub-Adviser's fee will be based on average net asset values as provided by the
Adviser.
(b) For the period from the Effective Date until the first anniversary
of the Effective Date, the minimum fee payable to the Sub-Adviser
pursuant to Section 4(a) shall be $375,000.
(c) The Adviser shall provide to the Sub-Adviser, promptly following
request therefor, all information reasonably requested by the
Sub-Adviser to support the calculation of the Sub-Advisory fee
(including any deferrals thereof) and shall permit the Sub-Adviser or
its agents, upon reasonable notice and at reasonable times and at
Sub-Adviser's cost to inspect the books and records of the Adviser
pertaining to such calculation. The Sub-Adviser may dispute the
Adviser's calculation of the Sub-Adviser's compensation provided for
under this Section 4 via binding arbitration by a panel of three (3)
arbitrators consisting of three (3) accountants. Each side shall
select one (1) accountant. The selected accountants shall appoint a
third accountant. The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. ss.ss.1-16, and any court having
jurisdiction thereof may enter judgment upon the award rendered by the
arbitrator. The place of arbitration shall be Boston, Massachusetts.
The arbitration shall begin within thirty (30) days of the
Sub-Adviser's notice of its intent to arbitrate unless the Adviser and
Sub-Adviser agree in writing to an extension. The fees and expenses of
the arbitration itself shall be borne equally by the parties to such
arbitration; provided, however, that the arbitrator shall be empowered
to award reimbursement of fees and expenditures of the prevailing
party by the non-prevailing party. Each party shall bear its own
expenses and its own costs incidental to each arbitration. The
procedures specified in this paragraph shall be the sole and exclusive
procedures for the resolution of disputes between the parties relating
to the calculation of the compensation of the Sub-Adviser under this
Agreement.
5. Other Activities of the Sub-Adviser and Its Affiliates. Nothing herein
contained shall prevent the Sub-Adviser or any associate of the Sub-Adviser from
engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity. It is understood that
officers, directors and employees of the Sub-Adviser or its affiliates may
continue to engage in providing portfolio management services and advice to
other investment companies, whether or not registered, to other investment
advisory clients of the Sub-Adviser or its affiliates and to said affiliates
themselves.
6. Avoidance of Inconsistent Position. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the
Sub-Adviser nor any of its investment management subsidiaries nor any of such
investment management subsidiaries' directors, officers or employees will act as
principal or agent or receive any commission, except as may be permitted by the
1940 Act and rules and regulations promulgated thereunder. The Sub-Adviser shall
not knowingly recommend that the Fund purchase, sell or retain securities of any
issuer in which the Sub-Adviser has a financial interest without obtaining prior
approval of the Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the Sub-Adviser or any of its
officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts or for the account of
clients other than the Fund. The Trust and Fund acknowledge the Sub-Adviser and
its officers, affiliates, and employees, and its other clients may at any time
have, acquire, increase, decrease or dispose of positions in investments which
are at the same time being acquired or disposed of hereunder. The Sub-Adviser
shall have no obligation to acquire with respect to the Fund, a position in any
investment which the Sub-Adviser, its officers, affiliates or employees may
acquire for its or their own accounts or for the account of another client, if
in the sole discretion of the Sub-Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund. Nothing herein
contained shall prevent the Sub-Adviser from purchasing or recommending the
purchase of a particular security for one or more funds or clients while other
funds or clients may be selling the same security.
7. No Partnership or Joint Venture. The Trust, the Fund, the Adviser and
the Sub-Adviser are not partners of or joint venturers with each other and
nothing herein shall be construed so as to make them such partners or joint
venturers or impose any liability as such on any of them. The Sub-Adviser is an
independent contractor and is not an agent of either the Advisor or the Fund.
8. Name of the Trust and the Fund. The Trust and the Fund may use the name
"Xxxx Xxxxxxx" or any name or names derived from or similar to the names "Xxxx
Xxxxxxx Advisers, LLC." or "Xxxx Xxxxxxx Life Insurance Company" only for so
long as the Investment Management Contract remains in effect. At such time as
such agreement shall no longer be in effect, the Trust and the Fund will (to the
extent that they lawfully can) cease to use such a name or any other name
indicating that the Fund is advised by or otherwise connected with the Adviser.
The Fund acknowledges that it has adopted the name Xxxx Xxxxxxx Large Cap Select
Fund through permission of Xxxx Xxxxxxx Life Insurance Company, a Massachusetts
insurance company, and agrees that Xxxx Xxxxxxx Life Insurance Company reserves
to itself and any successor to its business the right to grant the nonexclusive
right to use the name "Xxxx Xxxxxxx" or any similar name or names to any other
corporation or entity, including but not limited to any investment company of
which Xxxx Xxxxxxx Life Insurance Company or any subsidiary or affiliate thereof
shall be the investment adviser.
9. Limitation of Liability of Sub-Adviser. The Sub-Adviser shall not be
liable for any losses, claims, damages, liabilities or litigation (including
legal and other expenses) incurred or suffered by the Adviser, the Trust, the
Fund or any of their affiliates as a result of any error of judgment or mistake
of law by the Sub-Adviser with respect to the Fund, except that nothing in this
Agreement shall operate or purport to operate in any way to exculpate, waive or
limit the liability of the Sub-Adviser for, and the Sub-Adviser shall indemnify
and hold harmless the Adviser, the Trust, the Fund and all affiliated persons
thereof (within the meaning of Section 2(a)(3) of the 0000 Xxx) and all
controlling persons (as described in Section 15 of the 1933 Act) (collectively,
the "Adviser Indemnitees") against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which any of the Adviser Indemnities may become subject under the 1933 Act, the
1940 Act, the Advisers Act, or under any other statute, at common law or
otherwise arising out of or based on (a) the Sub-Adviser's causing the Fund to
be in violation of any applicable federal or state law, rule or regulation or
any investment policy or restriction set forth in the Fund's Prospectus or
Statement of Additional Information or any written policies, procedures,
guidelines or instructions provided in writing to the Sub-Adviser by the
Trustees or the Adviser, (b) the Sub-Adviser's causing the Fund to fail to
satisfy the requirements of Subchapter M of the Code for qualification as a
regulated investment company, excluding the provisions thereunder relating to
the declaration and payment of dividends, or (c) the Sub-Adviser's willful
misfeasance, bad faith or gross negligence generally in the performance of its
duties hereunder or its reckless disregard of its obligations and duties under
this Agreement.
10. Duration and Termination of this Agreement. This Agreement shall remain
in force until June 30, 2008; provided that this Agreement shall terminate
unless its continuance is approved prior to June 30, 2005 and annually
thereafter in the manner required by the 1940 Act or the rules and interpretive
positions of the Securities and Exchange Commission under the 1940 Act and shall
continue after June 30, 2008 provided that its continuance is so approved. This
Agreement may, on 10 days' written notice, be terminated at any time without the
payment of any penalty by the Trust or the Fund by vote of a majority of the
outstanding voting securities of the Fund, by the Trustees or the Adviser and
may be terminated upon 30 days written notice by the Sub-Adviser. Termination of
this Agreement with respect to the Fund shall not be deemed to terminate or
otherwise invalidate any provisions of any contract between the Sub-Adviser and
any other series of the Trust. This Agreement shall automatically terminate in
the event of its assignment or upon termination of the Investment Management
Contract. In interpreting the provisions of this Section 10, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" or "voting security"), shall be applied.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved in the manner required by the 1940 Act or the rules and interpretive
positions of the Securities and Exchange Commission under the 1940 Act.
12. Provision of Certain Information by the Sub-Adviser. The Sub-Adviser
will promptly notify the Adviser in writing of the occurrence of any of the
following events:
(a) the Sub-Adviser fails to be registered as an investment adviser
under the Advisers Act or under the laws of any jurisdiction in which
the Sub-Adviser is required to be registered as an investment adviser
in order to perform its obligations under this Agreement;
(b) the Sub-Adviser is served or otherwise receives notice of 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 Fund (excluding class action suits in which the 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;
(c) the controlling stockholder or senior management of the
Sub-Adviser changes, there is otherwise an actual change in control
(whether through sale of all or substantially all the assets of the
Sub-Adviser or a material change in management of the Sub-Adviser) or
an "assignment" (as defined in the 0000 Xxx) has or is proposed to
occur;
(d) any occurrence of any event that would disqualify the Sub-Adviser
from serving as a Sub-Adviser with respect to the Fund; or
(e) any representation of the Sub-Adviser under this Agreement is no
longer true in all material respects.
13. Representations and Acknowledgements of Sub-Adviser. The Sub-Adviser
hereby warrants and represents to the Adviser that (a) it has obtained all
applicable licenses, permits, registrations and approvals that may be required
in order to serve in its designated capacities with respect to the Fund,
including, but not limited to registration under the Advisers Act, and shall
continue to keep current such license, permits, registrations and approvals for
so long as this Agreement is in effect; (b) it is not prohibited by the Advisers
Act or other applicable laws and regulations from performing the services
contemplated by this Agreement; and (c) this Agreement has been duly and validly
authorized, executed and delivered on behalf of the Sub-Adviser and is a valid
and binding agreement of the Sub-Adviser enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and limitations on the availability of equitable remedies. The
Sub-Adviser represents that it has provided the Adviser with a complete copy of
its Form ADV as currently in effect and will promptly provide the Adviser with
copies of all amendments and supplements thereto. Such ADV, as amended and
supplemented from time to time, does not and shall not contain a material
misstatement of the information required to be stated therein.
14. Insurance. The Sub-Adviser will maintain at all times insurance
coverage for errors and omissions in an amount of coverage not less than $2
million (including a deductible not in excess of $100,000) and other terms to
which the Adviser shall not reasonably object.
15. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts.
16. Severability. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
17. Miscellaneous. (a) The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. 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. The name Xxxx Xxxxxxx Capital Series is the
designation of the Trustees under the Amended and Restated Declaration of Trust
dated February 28, 1992, as amended from time to time. The Declaration of Trust
has been filed with the Secretary of The Commonwealth of Massachusetts. The
obligations of the Trust and the Fund are not personally binding upon, nor shall
resort be had to the private property of, any of the Trustees, shareholders,
officers, employees or agents of the Fund, but only the Fund's property shall be
bound. The Trust or the Fund shall not be liable for the obligations of any
other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which is not
otherwise in the public domain, in connection with the performance of
its duties hereunder is to be regarded as confidential and for use
only by the Fund and/or its agents, and only in connection with the
Fund and its investments. Any information supplied by the Trust or the
Advisor, which is not otherwise in the public domain, in connection
with the Fund or the Adviser is to be regarded as confidential and for
use only by the Sub-Adviser and/or its agents, and only in connection
with the Sub-Adviser's services under this Agreement. Any party in
receipt of confidential information shall use reasonable precautions
(substantially identical to those used in safeguarding of its own
confidential information) that its directors/trustees, officers,
employees and advisors abide by these confidentiality provisions. Each
of the Trust, the Adviser and the Sub-Adviser acknowledge that the
restrictions contained in this Section 17(b) are necessary for the
protection of the business of the other parties hereto and are
considered to be reasonable for such purpose. Each of the Trust, the
Adviser and Sub-Adviser agree that any breach of this Section 17(b) is
likely to cause the other parties hereto substantial and irrevocable
damage and therefore, in the event of such breach, in addition to any
other remedies it may have at law or in equity, the non-breaching
party shall be entitled to specific performance and other injunctive
relief. The provisions of this Section 17(b) shall survive any
termination of this Agreement.
Yours very truly,
XXXX XXXXXXX CAPITAL SERIES on behalf
of Xxxx Xxxxxxx Large Cap Select Fund
By: ________________________________
The foregoing contract
is hereby agreed to as
of the date hereof.
XXXX XXXXXXX ADVISERS, LLC
By: ______________________________________
SHAY ASSETS MANAGEMENT, INC
By: ____________________________
Name:
