INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the "Agreement") dated
as of the 17th day of June, 2009, among Dreman/Claymore Dividend & Income Fund,
a Delaware statutory trust (the "Trust"), Claymore Advisors, LLC, a Delaware
limited liability company (the "Investment Adviser"), and Xxxxxxx & Xxxxxx
Advisors, Inc., a New York corporation (the "Investment Sub-Adviser").
WHEREAS, the Investment Adviser has agreed to furnish
investment management and advisory services to the Trust, a closed-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act") with respect to the Trust Assets (defined
below);
WHEREAS, the investment advisory agreement between the
Investment Adviser and the Trust dated as of the 27th day of January, 2004,
(such agreement or the most recent successor agreement between such parties
relating to advisory services to the Trust is referred to herein as the
"Investment Advisory Agreement") contemplates that the Investment Adviser may
sub-contract investment advisory services with respect to the Trust to a
sub-adviser(s) pursuant to a sub-advisory agreement(s) agreeable to the Trust
and approved in accordance with the provisions of the 1940 Act;
WHEREAS, the Investment Adviser wishes to retain the
Investment Sub-Adviser to provide certain sub-advisory services;
WHEREAS, the Investment Sub-Adviser is a registered investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"); and
WHEREAS, this Agreement has been approved in accordance with
the provisions of the 1940 Act, and the Investment Sub-Adviser is willing to
furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and between the parties
hereto as follows:
1. APPOINTMENT. The Investment Adviser hereby appoints the
Investment Sub-Adviser to act as a sub-adviser with investment discretion with
respect to the Trust as set forth in this Agreement and the Investment
Sub-Adviser accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.
2. SERVICES OF THE INVESTMENT SUB-ADVISER. Subject to the
succeeding provisions of this section, the oversight and supervision of the
Investment Adviser and the direction and control of the Trust's Board of
Trustees, the Investment Sub-Adviser will perform certain of the day-to-day
operations of the Trust which may include one or more of the following services
at the request of the Investment Adviser: (i)
managing the investment and reinvestment of the Trust Assets in accordance with
the investment policies of the Trust; (ii) arranging, subject to the provisions
of paragraph 3 hereof, for the purchase and sale of securities and other assets
for the Trust; (iii) providing investment research and credit analysis
concerning the Trust Assets; (v) placing orders for purchases and sales of Trust
Assets, (vi) maintaining the books and records as are required to support Trust
investment operations, (vii) monitoring on a daily basis the investment
activities and portfolio holdings relating to the Trust and (vii) voting proxies
relating to the Trust's portfolio securities in accordance with the proxy voting
policies and procedures of the Investment Sub-Adviser. At the request of the
Investment Adviser, the Investment Sub-Adviser will also, subject to the
oversight and supervision of the Investment Adviser and the direction and
control of the Trust's Board of Trustees, consult with the Investment Adviser as
to the investment policies and practices of the Trust, including (but not
limited to) the use by the Trust of financial leverage and elements (e.g., form,
amount and costs) relating to such financial leverage and the utilization by the
Trust of any interest rate or other hedging or risk management transactions in
connection therewith, and will perform any of the services described in the
Investment Advisory Agreement. In addition, the Investment Sub-Adviser will keep
the Trust and the Investment Adviser informed of developments materially
affecting the Trust and shall, on its own initiative, furnish to the Trust all
information relevant to such developments. The Investment Sub-Adviser will
periodically communicate to the Investment Adviser, at such times as the
Investment Adviser may direct, information concerning the purchase and sale of
securities for the Trust, including: (i) the name of the issuer, (ii) the amount
of the purchase or sale, (iii) the name of the broker or dealer, if any, through
which the purchase or sale is effected, (iv) the CUSIP number of the instrument,
if any, and (v) such other information as the Investment Adviser may reasonably
require for purposes of fulfilling its obligations to the Trust under the
Investment Advisory Agreement. The Investment Sub-Adviser will provide the
services rendered by it under this Agreement in accordance with the Trust's
investment objective, policies and restrictions (as currently in effect and as
they may be amended or supplemented from time to time) as stated in the Trust's
Prospectus filed with the SEC as part of the Trust's Registration Statement on
Form N-2 and the resolutions of the Trust's Board of Trustees.
3. DUTIES OF THE INVESTMENT ADVISER. The Investment Adviser
shall continue to have the responsibility for all services to be provided to the
Trust pursuant to the Investment Advisory Agreement, including oversight and
supervision of the Sub-Adviser hereunder, as set forth in, and subject to the
terms of, the Investment Advisory Agreement.
4. COVENANTS. In the performance of its duties under this
Agreement, the Investment Sub-Adviser:
(a) shall at all times comply and act in accordance with: (i)
the provisions of the 1940 Act and the Advisers Act and all applicable Rules and
Regulations of the Securities and Exchange Commission (the "SEC"); (ii) any
other applicable provision of law; (iii) the provisions of the Agreement and
Declaration of Trust and By-Laws of the Trust, as such documents are amended
from time to time; (iv) the investment
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objectives, policies and restrictions of the Trust as set forth in the Trust's
Prospectus filed with the SEC as part of the Trust's Registration Statement on
Form N-2; and (v) any policies, determinations and/or resolutions of the Board
of Trustees of the Trust or the Investment Adviser;
(b) will place orders either directly with the issuer or with
any broker or dealer. Subject to the other provisions of this paragraph, in
placing orders with brokers and dealers, the Investment Sub-Adviser will obtain
the best price and the most favorable execution of its orders. In placing
orders, the Investment Sub-Adviser will consider the experience and skill of the
firm's securities traders as well as the firm's financial responsibility and
administrative efficiency. Consistent with this obligation, the Investment
Sub-Adviser may select brokers on the basis of the research, statistical and
pricing services they provide to the Trust and other clients of the Investment
Adviser or the Investment Sub-Adviser, as the case may be. Information and
research received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by the Investment Sub-Adviser hereunder. A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that the
Investment Sub-Adviser determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Investment Adviser and the Investment Sub-Adviser to the Trust and their
other clients and that the total commissions paid by the Trust will be
reasonable in relation to the benefits to the Trust over the long-term. In no
instance, however, will the Trust's securities be purchased from or sold to the
Investment Adviser, the Investment Sub-Adviser or any affiliated person thereof,
except to the extent permitted by the SEC or by applicable law;
(c) will maintain books and records with respect to the
Trust's securities transactions and render to the Investment Adviser and the
Trust's Board of Trustees such periodic and special reports as they may request;
and
(d) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder.
4. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall
prevent the Investment Sub-Adviser or any officer, employee or other affiliate
thereof from acting as investment adviser for any other person, firm or
corporation, or from engaging in any other lawful activity, and shall not in any
way limit or restrict the Investment Sub-Adviser or any of its officers,
employees or agents from buying, selling or trading any securities for their own
accounts or for the accounts of others for whom it or they may be acting;
provided, however, that the Investment Sub-Adviser will not undertake any
activities which will adversely affect the performance of its obligations under
this Agreement.
5. BOOKS AND RECORDS. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Investment Sub-Adviser hereby agrees that all
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records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any such records upon the
Trust's request, provided that the Investment Sub-Advisor shall be allowed to
maintain copies of any such records to the extent required by the 1940 Act and
the Investment Advisers Act of 1940, as amended. The Investment Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
6. AGENCY CROSS TRANSACTIONS. From time to time, the
Investment Sub-Adviser or brokers or dealers affiliated with the Investment
Sub-Adviser may find themselves in a position to buy for certain of their
brokerage clients (each an "Account") securities which the Investment
Sub-Adviser's investment advisory clients wish to sell, and to sell for certain
of their brokerage clients securities which advisory clients wish to buy. Where
one of the parties is an advisory client, the Investment Sub-Adviser or the
affiliated broker or dealer cannot participate in this type of transaction
(known as a cross transaction) on behalf of an advisory client and retain
commissions from both parties to the transaction without the advisory client's
consent. This is because in a situation where a Investment Sub-Adviser is making
the investment decision (as opposed to a brokerage client who makes his own
investment decisions), and the Investment Sub-Adviser or an affiliate is
receiving commissions from one or both sides of the transaction, there is a
potential conflicting division of loyalties and responsibilities on the
Investment Sub-Adviser's part regarding the Advisory client. The SEC has adopted
a rule under the Advisers Act which permits an Investment Sub-Adviser or its
affiliates to participate on behalf of an Account in agency cross transactions
if the Advisory client has given written consent in advance. By execution of
this Agreement, the Trust authorizes the Investment Sub-Adviser or its
affiliates to participate in agency cross transactions involving an Account,
consistent with any policies and procedures that may be adopted by the Board of
Trustees of the Trust. The Trust may revoke its consent at any time by written
notice to the Investment Sub-Adviser.
7. EXPENSES. During the term of this Agreement, the Investment
Sub-Adviser will bear all costs and expenses of its employees and any overhead
incurred by the Investment Sub-Adviser in connection with their duties hereunder
and shall bear the costs of any salaries or trustees, fees of any officers or
trustees of the Trust who are affiliated persons (as defined in the 0000 Xxx) of
the Investment Sub-Adviser.
8. COMPENSATION.
(a) The Investment Adviser agrees to pay to the Investment
Sub-Adviser and the Investment Sub-Adviser agrees to accept as full
compensation for all services rendered by the Investment Sub-Adviser as such, a
monthly fee (the "Investment Management Fee") payable in arrears at an annual
rate equal to (i) for the initial two years commencing on the effectiveness of
this Agreement an amount equal to 0.33% and (ii) commencing on the second
anniversary of the effectiveness of this Agreement an amount equal to 0.42%,
each calculated using the average daily value of the Trust's Managed Assets.
"Managed Assets" means the total assets of the Trust (including the
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assets attributable to the proceeds from any financial leverage) minus the sum
of the accrued liabilities (other than the aggregate indebtedness constituting
financial leverage). The liquidation preference of any preferred shares of the
Trust, if any, constituting financial leverage shall not be considered a
liability of the Trust. For any period less than a month during which this
Agreement is in effect, the fee shall be prorated according to the proportion
which such period bears to a full month of 28, 29, 30 or 31 days, as the case
may be. Investment Sub-Adviser agrees to waive fees owed to it hereunder for the
initial two months of this Agreement, subject to the approval by the Trust's
voting securities holders of this Agreement, as described below. In addition,
Investment Sub-Adviser agrees to have the costs associated with the change of
Trust sub-advisers, not to exceed $50,000, set off against amounts owed to
Investment Sub-Advisor hereunder, provided that the Trust's voting-securities
holders approve the Investment Sub-Adviser.
To the extent the Trust's voting-securities holders do not approve this
Agreement as required by the 1940 Act, the Trust shall pay to Investment
Sub-Adviser the fees waived by Investment Sub-Adviser for the first two months.
(b) For purposes of this Agreement, the total assets of the
Trust shall be calculated in the same manner as set forth in the Investment
Advisory Agreement.
9. CERTAIN INFORMATION. The Investment Sub-Adviser shall
promptly notify the Investment Adviser in writing of the occurrence of any of
the following events: (a) the Investment Sub-Adviser failing to be registered as
an investment adviser under the Advisers Act, (b) the Investment Sub-Adviser
having been served or otherwise have 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 Trust, (c) the occurrence of any
change in control of the Investment Sub-Adviser or any parent of the Investment
Sub-Adviser within the meaning of the 1940 Act, or (d) the occurrence of any
material adverse change in the business or financial position of the Investment
Sub-Adviser, that in the reasonable judgment of the Investment Sub-Adviser,
could materially impact the ability of the Investment Sub-Adviser to perform
services hereunder.
10. LIMITATION ON LIABILITY.
(a) The Investment Sub-Adviser will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Investment
Sub-Adviser, the Investment Adviser or by the Trust in connection with the
performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or 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
duties under this Agreement. In addition, the Investment Sub-Adviser shall have
no liability, and shall be indemnified and held harmless by the Trust, for any
losses that are directly or indirectly related to any action or inaction
occurring or failing to occur on or before the effectiveness of this Agreement
of, the Trust, the Adviser or any prior sub-adviser.
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(b) The Trust may, but shall not be required to, make advance
payments to the Investment Sub-Adviser in connection with the expenses of the
Investment Sub-Adviser in defending any action with respect to which damages or
equitable relief might be sought against the Investment Sub-Adviser under this
Section (which payments shall be reimbursed to the Trust by the Investment
Sub-Adviser as provided below) if the Trust receives (i) a written affirmation
of the Investment Sub-Adviser's good faith belief that the standard of conduct
necessary for the limitation of liability in this Section has been met and (ii)
a written undertaking to reimburse the Trust whether or not the Investment
Sub-Adviser shall be deemed to have liability under this Section, such
reimbursement to be due upon (1) a final decision on the merits by a court or
other body before whom the proceeding was brought as to whether or not the
Investment Sub-Adviser is liable under this Section or (2) in the absence of
such a decision, upon the request of the Investment Sub-Adviser for
reimbursement by a majority vote of a quorum consisting of trustees of the Trust
who are neither "interested persons" of the Trust (as defined in Section
2(a)(19) of the 0000 Xxx) nor parties to the proceeding ("Disinterested
Non-Party Trustees"). In addition, at least one of the following conditions must
be met: (A) the Investment Sub-Adviser shall provide a security for such
Investment Sub-Adviser undertaking, (B) the Trust shall be insured against
losses arising by reason of any lawful advance, or (C) a majority of a quorum of
the Disinterested Non-Party Trustees of the Trust or an independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the Investment Sub-Adviser ultimately will be found not to be
liable under this Section.
11. DURATION AND TERMINATION. This Agreement shall become
effective as of the date hereof and shall continue on an interim basis (unless
terminated automatically as set forth below) until the earlier of (i) approval
by a vote of a majority of the outstanding voting securities of the Trust at the
time outstanding and entitled to vote or (ii) 150 calendar days from the date
hereof. Thereafter, upon approval by a vote of a majority of the outstanding
voting securities of the Trust at the time outstanding and entitled to vote and
subject to the termination provisions contained herein, this Agreement shall
continue for an initial period of two years and thereafter successive periods of
12 months, provided such continuance is specifically approved at least annually
by both (a) the vote of a majority of the Trust's Board of Trustees or a vote of
a majority of the outstanding voting securities of the Trust at the time
outstanding and entitled to vote and (b) by the vote of a majority of the
Trustees, who are not parties to this Agreement or interested persons (as such
term is defined in the 0000 Xxx) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated by the Trust, without the payment of
any penalty, upon giving the Investment Sub-Adviser 60 days' notice (which
notice may be waived by the Investment Sub-Adviser), provided that such
termination by the Trust shall be directed or approved by the vote of a majority
of the Trustees of the Trust in office at the time or by the vote of the holders
of a majority of the voting securities of the Trust at the time outstanding and
entitled to vote, or by the Investment Sub-Adviser on 60 days' written notice
(which notice may be waived by the Trust), and will terminate automatically upon
any termination of the Investment Advisory
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Agreement between the Trust and the Investment Adviser. This Agreement will also
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings of such terms
in the 1940 Act.)
12. NOTICES. Any notice under this Agreement shall be in
writing to the other party at such address as the other party may designate from
time to time for the receipt of such notice and shall be deemed to be received
on the earlier of the date actually received or on the fourth day after the
postmark if such notice is mailed first class postage prepaid.
13. 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. Any amendment of this
Agreement shall be subject to the 1940 Act.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware for contracts to
be performed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.
15. USE OF THE NAME XXXXXXX & XXXXXX. Upon the effective date
of this Agreement the name of the Fund will be changed to "Claymore Dividend &
Income Fund." For the period commencing one year following approval by the
Trust's voting securities holders of this Agreement and terminating three years
following approval by the Trust's voting securities holders of this Agreement,
upon written notice of the Investment Sub-Adviser, the Trust's name shall be
changed to use the name of Investment Sub-Adviser or identifying word "Xxxxxxx &
Xxxxxx" in the name of the Trust without further action of the Trust, other than
any notice or other ministerial filings required under applicable law. Such
notice shall be conditioned upon the employment of the Investment Sub-Adviser as
the investment sub-adviser to the Trust. The names or identifying words "Xxxxxxx
& Xxxxxx" may be used from time to time in other connections and for other
purposes by the Investment Sub-Adviser and any of its affiliates. To the extent
Investment Sub-Adviser consents to the use of its name in the Trust, the
Investment Sub-Adviser may require the Trust to cease using or "Xxxxxxx &
Xxxxxx" in the name of the Trust if the Trust or the Investment Adviser ceases
to employ, for any reason, the Investment Sub-Adviser, any successor thereto or
any affiliate thereof as investment sub-adviser of the Trust. Notwithstanding
the foregoing, the Investment Adviser may use the Sub-Adviser's name in certain
marketing materials used provided that the Sub-Adviser has approved in writing
such material.
16. 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 other wise, the
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remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding on, and shall inure to the benefit of the parties hereto and their
respective successors.
17. COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, each of which shall constitute an original
counterpart, and all of which, together, shall constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers designated below as
of the day and year first above written.
CLAYMORE ADVISORS, LLC
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Chief Executive Officer
XXXXXXX & XXXXXX ADVISORS, INC.
By: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
Executive Vice President
DREMAN/CLAYMORE DIVIDEND & INCOME FUND
By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
Chief Legal Officer
