SUB-ADVISORY AGREEMENT
Agreement made as of October 30, 1998, between XXXXXXXX & CO.
("Xxxxxxxx"), an Ohio corporation, and XXXX, XXXXXXX & COMPANY, INC.
("Sub-Adviser"), a corporation organized under the laws of the State of New York
(the "Agreement").
RECITALS
(1) Xxxxxxxx has entered into an Investment Management and
Administration Agreement dated July 18, 1997 and revised October 30, 1998
("Management Agreement"), with Xxxxxxxx Capital Trust ("Trust"), an open-end
management investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"), with respect to the Xxxxxxxx Financial Services
Fund series of the Trust ("Fund"); and
(2) Xxxxxxxx wishes to retain the Sub-Adviser to furnish certain
investment advisory services to Xxxxxxxx and the Fund, and the Sub-Adviser is
willing to furnish those services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. Appointment. Xxxxxxxx hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the Fund's assets for the period and on
the terms set forth in this Agreement. The Sub-Adviser accepts that appointment
and agrees to render the services herein set forth, for the compensation herein
provided.
2. Duties as Sub-Adviser.
(a) Subject to the supervision of and any guidelines adopted by the
Trust's Board of Trustees (the "Board") and by Xxxxxxxx, the Sub-Adviser will
provide a continuous investment program for the Fund's assets, including
investment research and management. The Sub-Adviser will determine from time to
time what investments will be purchased, retained or sold by the Fund. The
Sub-Adviser will be responsible for placing purchase and sell orders for the
securities investments and for other related transactions. The Sub-Adviser will
provide services under this Agreement in accordance with the Fund's investment
objective, policies and restrictions as stated in the Fund's currently effective
registration statement under the Securities Act of 1933, as amended, and the
1940 Act ("Registration Statement"), and any amendments or supplements thereto.
(b) The Sub-Adviser agrees that, in placing orders with brokers or
dealers, it will attempt to obtain the best net result in terms of price and
execution; provided that, on behalf of the Fund, the Sub-Adviser may, in its
discretion, purchase or sell portfolio securities through brokers who provide
the Fund with research, analysis, advice and similar services, and the
Sub-Adviser may pay to those brokers, in return for brokerage and research
services a higher commission than may be charged by other brokers, subject to
the Sub-Adviser's determining in good faith that such commission is reasonable
in terms either of the particular transaction or of the overall responsibility
of the Sub-Adviser 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. In no instance will portfolio securities be
purchased from or sold to the Sub-Adviser or Xxxxxxxx, or any affiliated person
of either of them, except in accordance with the federal securities laws and the
rules and regulations thereunder. The Sub-Adviser, or any affiliated person
thereof or of Xxxxxxxx, may act as broker in connection with transactions in
portfolio securities on behalf of the Fund, provided that such actions are in
compliance with the federal securities laws and the rules and regulations
thereunder, including Section 17(e) of the 1940 Act and Rule 17e-1 thereunder.
Whenever the Sub-Adviser simultaneously places orders to purchase or sell the
same security on behalf of the Fund and one or more other accounts advised by
the Sub-Adviser, the orders will be allocated as to price and amount among all
such accounts in a manner believed to be equitable by the Sub-Adviser over time
to each account. Xxxxxxxx recognizes that in some cases this procedure may
adversely affect the results obtained for the Fund.
(c) The Sub-Adviser will maintain all books and records related to its
activities hereunder required to be maintained by the Sub-Adviser pursuant to
the 1940 Act and the rules and regulations promulgated thereunder with respect
to transactions on behalf of the Fund, and will furnish the Trust and Xxxxxxxx
with such
periodic and special reports as the Board or Xxxxxxxx reasonably may request. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which it maintains for the Fund are
the property of the Trust, agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act any records which it maintains for the Trust and which
are required to be maintained by Rule 31a-1 under the 1940 Act, and further
agrees to surrender promptly to the Trust any records which it maintains for the
Trust (or copies thereof) upon request by the Trust.
(d) At such times as shall be reasonably requested by the Board or
Xxxxxxxx, the Sub-Adviser will provide the Board and Xxxxxxxx with economic and
investment analyses and reports as well as quarterly reports setting forth the
Fund's performance and make available to the Board and Xxxxxxxx any economic,
statistical and investment services normally available to institutional or other
customers of the Sub-Adviser.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of any illiquid Fund securities and will assist in providing independent sources
of market value for all other portfolio securities.
3. Further Duties. In all matters relating to the performance of this
Agreement, the Sub-Adviser will act in conformity with the Trust's Declaration
of Trust, By-Laws and currently effective Registration Statement and any
amendments or supplements thereto and with the written instructions and
directions of the Board and Xxxxxxxx and will comply with the requirements of
the 1940 Act, the Investment Advisers Act of 1940, as amended ("Advisers Act"),
the rules under each, and Subchapter M of the Internal Revenue Code as
applicable to regulated investment companies. In addition, the Sub-Adviser will
act in conformity with all other applicable federal and state laws and
regulations either as reflected in the Registration Statement or otherwise
provided in writing to the Sub-Adviser by Xxxxxxxx. Xxxxxxxx agrees to provide
to the Sub-Adviser copies of the Trust's Declaration of Trust, By-Laws,
Registration Statement, written instructions and directions of the Board and
Xxxxxxxx, and any amendments or supplements to any of these materials as soon as
practicable after such materials become available.
4. Notice of Appointment. During the term of this Agreement, the
Sub-Adviser agrees to provide Xxxxxxxx and the Board with prior notice in the
event that the Sub-Adviser agrees to provide investment advice on a
discretionary basis for any other registered investment company investing
primarily in equity securities of issuers in the financial services industries.
5. Expenses. During the term of this Agreement, the Sub-Adviser will
bear all expenses incurred by it in connection with its investment sub-advisory
services under this Agreement.
6. Compensation.
(a) For the services provided and the expenses assumed by the
Sub-Adviser pursuant to this Agreement, Xxxxxxxx, not the Fund, will pay to the
Sub-Adviser a fee, computed daily and payable monthly, as computed in the manner
set forth in Schedule A, together with a schedule showing the manner in which
the fee was computed.
(b) The fee shall be computed daily and payable monthly to the
Sub-Adviser on or before the fifteenth business day of the next succeeding
calendar month.
(c) If this Agreement becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
7. Limitation Of Liability. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund, the
Trust or its shareholders or by Xxxxxxxx in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on
its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement.
8. Indemnification.
(a) The Sub-Adviser agrees to indemnify and hold Xxxxxxxx harmless
against any losses, expenses, claims, damages or liabilities (or actions or
proceedings in respect thereof, including attorneys' fees and costs of
settlement), to which Xxxxxxxx may become subject arising out of or based on the
breach by the Sub-Adviser of any provision of this Agreement other than a breach
caused in any way by Xxxxxxxx; 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 judgment, or independent counsel agreed upon by Xxxxxxxx and the
Sub-Adviser shall have concluded in a written opinion, that such loss, expense,
claim, damage or liability resulted primarily from Xxxxxxxx'x willful
misfeasance, bad faith or gross negligence or by reason of the reckless
disregard by Xxxxxxxx of its duties. The foregoing indemnification shall be in
addition to any rights that Xxxxxxxx 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 Xxxxxxxx, be controlled by Xxxxxxxx or be under common control with
Xxxxxxxx and its affiliates, directors, officers, employees and agents. The
Sub-Adviser's agreements in this paragraph shall also extend to any of
Xxxxxxxx'x successors or the successors of the aforementioned affiliates,
directors, officers, employees or agents.
(b) Xxxxxxxx agrees to indemnify and hold harmless the Sub-Adviser
against any losses, expenses, claims, damages or liabilities (or actions or
proceedings in respect thereof, including attorneys' fees and costs of
settlement), to which the Sub-Adviser may become subject arising out of or based
on the breach by Xxxxxxxx of any provision of this Agreement or the Management
Agreement other than a breach that was caused in any way by the Sub-Adviser;
provided, however, that Xxxxxxxx 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 Xxxxxxxx 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. Xxxxxxxx'x
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 affiliate, directors, officers, employees and agents. Xxxxxxxx'x
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 8(a)
or 8(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 to so
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 legal fees and expenses incurred by the
indemnified party for continuing its 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.
9. Representations of Sub-Adviser. The Sub-Adviser represents, warrants
and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under
the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Agreement; (iii)
has met, and will seek to continue to meet for so long as this Agreement remains
in effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; and (v) will promptly notify Xxxxxxxx of the occurrence of any event
that would disqualify the Sub-Adviser from serving as an investment adviser of
an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and will provide Xxxxxxxx and
the Board with a copy of that code of ethics, together with evidence of its
adoption. Within fifteen days of the end of the last calendar quarter of each
year that this Agreement is in effect, a managing director of the Sub-Adviser
shall certify to Xxxxxxxx that the Sub-Adviser has complied with the
requirements of Rule 17j-1 during the previous year and that there has been no
violation of the Sub-Adviser's code of ethics or, if such a violation has
occurred, that appropriate action was taken in response to such violation. Upon
the written request of Xxxxxxxx, the Sub-Adviser shall permit Xxxxxxxx, its
employees or its agents to examine the reports required to be made to the
Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Xxxxxxxx and the Trust with a copy of
its Form ADV as most recently filed with the Securities and Exchange Commission
("SEC") and promptly will furnish a copy of all amendments to Xxxxxxxx and the
Trust at least annually.
(d) The Sub-Adviser will notify Xxxxxxxx of any change of control of
the Sub-Adviser, including any change of its general partners or 25%
shareholders, as applicable, and any changes in the key personnel of the
Sub-Adviser, in each case prior to or at the time of such change.
10. Representations and Warranties of Xxxxxxxx. Xxxxxxxx represents,
warrants and agrees as follows:
(a) Xxxxxxxx (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act from performing the
services contemplated by the Management Agreement; (iii) has met, and will seek
to continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by the Management Agreement; (iv) has the
authority to enter into and perform the services contemplated by the Management
Agreement; and (v) will promptly notify the Sub-Adviser of the occurrence of any
event that would disqualify Xxxxxxxx from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
(b) Xxxxxxxx agrees that it will notify the Sub-Adviser, to the extent
possible, within a reasonable period of time prior to any termination of this
Agreement by Xxxxxxxx pursuant to Section 11(c) (including any termination by
assignment resulting from a foreseeable change in control of Xxxxxxxx that is a
matter of public information), and that it will notify the Sub-Adviser promptly
following any other termination of this Agreement pursuant to Section 11(c).
11. Duration and Termination.
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by a vote of the holders of a majority of the outstanding
voting securities of the Fund.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Agreement will continue automatically for successive periods of
twelve months each, provided that such continuance is specifically approved at
least annually (i) by a vote of a majority of those trustees of the Trust who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or by a vote of the holders of a majority of the outstanding
voting securities of the Fund.
(c) Notwithstanding the foregoing, this Agreement may be terminated at
any time, without the payment of any penalty, by vote of the Board or by a vote
of the holders of a majority of the outstanding voting securities of the Fund on
60 days' written notice to the Sub-Adviser. This Agreement may also be
terminated, without the payment of any penalty, by Xxxxxxxx: (i) upon 120 days'
written notice to the Sub-Adviser; (ii) upon material breach by the Sub-Adviser
of any of the representations and warranties set forth in Paragraph 9 of this
Agreement; or (iii) if the Sub-Adviser becomes unable to discharge its duties
and obligations under this Agreement, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Fund. The Sub-Adviser may terminate this Agreement at any time, without the
payment of any penalty, on 120 days' written notice to Xxxxxxxx. This Agreement
will terminate automatically in the event of its assignment or upon termination
of the Management Agreement.
12. 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 of this Agreement shall be
effective until approved by the Board, including a majority of its independent
trustees, cast in person at a meeting called for the purpose of voting on such
approval, and, if required by the 1940 Act, by the vote of the holders of a
majority of the Fund's outstanding voting securities.
13. Governing Law. This Agreement shall be construed in accordance with
the 1940 Act and the laws of the Commonwealth of Massachusetts. To the extent
that the applicable laws of the Commonwealth of Massachusetts conflict with the
applicable provisions of the 1940 Act, the latter shall control.
14. Limitation of Liability of the Trustees and Shareholders of the
Fund. The Trustees of the Trust and the shareholders of the Fund shall not be
liable for any obligations of the Fund related to this Contract, and the
Sub-Adviser agrees that, in asserting any rights or claims under this Agreement
against the Fund, it shall look only to the assets and property of the Fund in
settlement of such right or claim, and not to such Trustees or shareholders.
15. Miscellaneous. 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. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell" and "security" shall have the same
meaning as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the date and year first
above written.
Attest: XXXXXXXX & CO.
/s/ Xxxx X. Xxxxxxx By:/s/ Xxxxxx X. Xxxxxx
-------------------------- Name: Xxxxxx X. Xxxxxx
Title: Secretary/Treasurer
Attest: XXXX, XXXXXXX & COMPANY, INC.
/s/ Xxxxx Xxxxx By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------- Name: Xxxxxxxx X. Xxxxxx
Title: Executive Vice President
SCHEDULE A
FUND ANNUAL FEE RATE
---- ---------------
Xxxxxxxx Financial Services Fund 60% of the fees actually paid to Xxxxxxxx
under the Management Agreement with the Trust
on behalf of Xxxxxxxx Financial Services Fund
("Financial Services Fund").
(The Sub-Adviser acknowledges that, for the
period ending May 1,1999, Xxxxxxxx & Co. has
agreed to waive some or all of its fees
and/or to reimburse other Financial Services
Fund expenses under the Management Agreement
with the Trust to the extent that Financial
Services Fund's total expenses for its Class
A shares exceed 1.50% of the average daily
net assets of such class.)
