SUBADVISORY AGREEMENT
AGREEMENT made as of this 28th day of February, 1997, by and between
ROCKWOOD ADVISERS, INC., a Delaware corporation (the "Investment Manager") and
ASPEN SECURITIES AND ADVISORY, INC., an Idaho corporation (the "Subadviser").
WHEREAS the Investment Manager intends to enter into an investment
management agreement (the "Management Agreement") with Rockwood Fund, Inc. (the
"Fund") pursuant to which the Investment Manager will furnish the Fund with
investment management and other services; and
WHEREAS the Management Agreement provides that the Investment Manager
may, at its own expense, contract for research and other services as it deems
necessary or desirable to fulfill such obligations; and
WHEREAS, the Subadviser is registered under the Investment Advisers Act of
1940; and
WHEREAS, the Investment Manager desires to retain the Subadviser to
provide subadvisory and research services in connection with the Fund and the
Subadviser is willing to provide such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Investment Manager will manage the investment and reinvestment of the
assets of Fund including the regular furnishing of advice with respect to the
Fund's portfolio transactions subject at all times to the control and oversight
of the Board of Directors of the Fund, for the period and on the terms set forth
in its Management Agreement with the Fund. The Investment Manager retains
responsibility for selecting brokers, monitoring trade executions, communicating
instructions to the Fund's custodian and other Fund agents, and all other
functions pertaining to the management of the Fund.
2. The Subadviser will make itself available to advise and consult with the
Investment Manager regarding the selection, clearing, and safekeeping of the
Fund's portfolio investments and assist in pricing and generally monitoring such
investments. The Subadviser agrees to permit the use of its name and the names
of its personnel and other information about the Subadviser in the marketing and
other literature in connection with the Fund.
3. In consideration of the Subadviser's services, the Investment Manager, and
not the Fund, shall pay to the Subadviser a percentage of the Investment
Manager's Net Fees. "Net Fees" are hereby defined as the actual amounts received
by the Investment Manager as compensation pursuant to paragraph 7 of the
Management Agreement less reimbursements, if any, pursuant to the guaranty set
forth in paragraph 9 of the Management Agreement and waivers of such
compensation by the Investment Manager. The amount of the percentage and the
timing of the payment shall be determined by the schedule and accompanying
definitions set forth in Appendix A hereto.
1
4. The Subadviser will pay all expenses incurred by it in connection with
this Subadvisory Agreement.
5. The services of the Subadviser hereunder are not to be deemed exclusive, and
the Subadviser shall be free to render similar services to others in addition to
the Investment Manager and the Fund so long as its services hereunder are not
impaired thereby. The Subadviser shall not render, however, similar services to
any investment company either directly or indirectly as an adviser, subadviser,
portfolio manager, consultant, or otherwise, other than to the Fund and other
investment companies for which the Investment Manager or its affiliates provide
investment management services. In the event of termination of this Subadvisory
Agreement, the Subadviser agrees that until the later of (A) two years from the
date of this Subadvisory Agreement or (B) one year from the date of such
termination, the Subadviser shall not, and shall use its best efforts to assure
that its directors, officers, employees, agents, and similar personnel shall
not, render similar services to any investment company either directly or
indirectly as an adviser, subadviser, portfolio manager, consultant, or
otherwise, and this agreement shall survive the termination of this Subadvisory
Agreement.
6. This Subadvisory Agreement shall become effective upon approval by the
directors and shareholders of the Fund as required by the Investment Company Act
of 1940 (the "1940 Act"). Thereafter, if not terminated, this Subadvisory
Agreement shall continue from year to year if approved annually by (a) the Board
of Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund as defined in the 1940 Act and (b) by a vote of a
majority of the Directors of the Fund who are not parties to the Subadvisory
Agreement, or interested persons of any such party. This Subadvisory Agreement
may be terminated without penalty at any time either by vote of the Board of
Directors of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to the Investment
Manager and the Subadviser, or by the Investment Manager or the Subadviser on 60
days' written notice to the Fund. In the event of termination upon notice as
herein described, the Investment Manager and the Subadviser agree that, subject
to the provisions of the 1940 Act, no party hereto will be entitled to or seek
indemnification or compensation from the other party for expenses incurred in
connection with marketing efforts performed during the term of this Agreement.
This Subadvisory Agreement shall immediately terminate in the event of its
assignment or upon the termination of the Management Agreement.
7. The Subadviser shall not be liable to the Fund or any shareholder of the Fund
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Subadvisory Agreement relates, but
nothing herein contained shall be construed to protect the Subadviser against
any liability to the Fund by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under this Subadvisory Agreement.
8. Subject to and in accordance with the Articles of Incorporation and Bylaws of
the Fund, the Investment Manager, and the Subadviser, it is understood that
directors, officers, agents and shareholders of the Fund, the Investment
Manager, or Subadviser are or may be interested in the Fund, the Investment
Manager, or the Subadviser as directors, officers, shareholders or otherwise,
that the Investment Manager or the Subadviser is or may be interested in the
Fund or the Investment Manager or the Subadviser as a shareholder or otherwise
and that the effect and nature of any such interests shall be governed by law
and by the provisions, if any, of said Articles of Incorporation or Bylaws.
2
9. All notices hereunder shall be in writing and shall be delivered in person or
sent by facsimile transmission that is confirmed by regular, registered, or
certified mail to the following address for the respective parties:
Rockwood Advisers, Inc.
00 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Aspen Securities and Advisory, Inc.
000 Xxxxx Xxxxxx,
Xxxxx 000 Xxxxx Xxxxx, XX
00000 Fax: (000) 000-0000
Notice shall be deemed given, five days after depositing in a post office,
postage prepaid and if sent by facsimile transmission five days after
confirmation has been mailed.
10. As used in this Subadvisory Agreement, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meaning provided therefor in the 1940 Act, as from time to time
amended.
IN WITNESS WHEREOF, the parties hereto have executed this Subadvisory
Agreement on the day and year first above written.
ROCKWOOD ADVISERS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
ASPEN SECURITIES AND ADVISORY, INC.
By: /s/ Xxxx X. Xxxxxx
3
APPENDIX A
ROCKWOOD FUND, INC.
SUBADVISORY FEE
The Investment Manager shall pay to the Subadviser within 30 days of
each Performance Determination Date, as defined in paragraph A below, a
percentage of the Net Fees, as defined in paragraph 3 of this Subadvisory
Agreement, earned since the later of the effective date of this Subadvisory
Agreement or the prior Performance Determination Date, as defined in paragraph A
below. The amount of the percentage shall be determined by reference to the grid
set forth below.
SUBADVISER'S FEE AS A PERCENTAGE OF INVESTMENT MANAGER'S NET FEES
RELATIVE PERFORMANCEA
TOTAL NET ASSETSB More than 50 basis Within 50 basis More than 50 basis
points better than ATR points of ATR points below ATR
Less than or equal to $15,000,000 30% 20% 10%
Greater than $15,000,000 and 40% 30% 20%
Less than or equal to $50,000,000
Greater than $50,000,000 50% 40% 30%
---------------------------------- ------------------------------ ------------------------- -------------------------
A. "Relative Performance" shall be determined from comparing the Fund's total
return with the average total return ("ATR") of funds with the investment
objective of "growth" as compiled by Morningstar, Inc., or, if unavailable,
other similar service acceptable to the parties and the Fund. The Relative
Performance shall be determined as of the last calendar day of each month
("Performance Determination Date") and shall measure the Relative Performance
for the most recent 3 year period ("Measurement Period"), except that (A) for
the first 12 months of this Subadvisory Agreement, Relative Performance shall be
based upon annualized returns, the first three Performance Determination Dates
shall be the next three calendar quarter ends after the effective date of this
Subadvisory Agreement, and the Measurement Periods shall be the most recent
three months and the fourth Performance Determination Date shall be the next
calendar quarter end and the Measurement Period shall be the most recent 1 year
period, and (B) for the 13th through the 24th month of this Subadvisory
Agreement, Relative Performance shall be determined as of the last calendar day
of each month and shall measure the Relative Performance for the most recent 1
year period.
B. "Total Net Assets" shall be the total net assets of the Fund as of the
Performance Determination Date.
A-1
