SUBADVISORY AGREEMENT
Xxxx Xxxxx Partners Equity Trust
Xxxx Xxxxx Partners Classic Values Fund
April 13, 2007
Xxxxxxx & Associates, L.P.
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Dear Ladies/Gentlemen:
THIS AGREEMENT is made this 13th day of April, 2007, by and
between Xxxx Xxxxx Partners Fund Advisor, LLC, a Delaware limited
liability company (the Manager) and Xxxxxxx & Associates, L.P., a
New York limited partnership (the Subadviser).
WHEREAS, the Manager has been retained by Xxxx Xxxxx
Partners Equity Trust (the Trust), a business trust organized
under the laws of the State of Maryland, to act as manager to the
Trust with respect to the series of the Trust designated as Xxxx
Xxxxx Partners Classic Values Fund (the Fund);
WHEREAS, the Trust engages in business as an open-end,
diversified management investment company, consisting of multiple
series of investment portfolios, and is registered as such under
the Investment Company Act of 1940, as amended (the 1940 Act);
WHEREAS, the Manager represents that it is registered under
the Investment Advisers Act of 1940, as amended (the Advisers
Act), as an investment adviser and engages in the business of
acting as an investment adviser;
WHEREAS, the Subadviser represents that it is registered
under the Advisers Act as an investment adviser and engages in
the business of acting as an investment adviser, and
WHEREAS, the Manager wishes to engage the Subadviser to
provide certain investment advisory services for the Fund, and
the Subadviser is willing to provide such investment advisory
services for the Fund on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. Investment Description; Appointment
The Trust desires to employ its capital relating to the Fund
by investing and reinvesting in investments of the kind and in
accordance with the investment objective(s), policies and
limitations specified in the prospectus (the Prospectus) and the
statement of additional information (the Statement) describing
the Fund filed with the Securities and Exchange Commission as
part of the Trust?s Registration Statement on Form N-1A, as
amended or supplemented from time to time, and in the manner and
to the extent as may from time to time be approved by the Board
of Trustees of the Trust (the Board). Copies of the Prospectus
and the Statement have been or will be submitted to the
Subadviser. The Manager agrees promptly to provide copies of all
amendments and supplements to the current Prospectus and the
Statement to the Subadviser on an on-going basis. Until the
Manager delivers any such amendment or supplement to the
Subadviser, the Subadviser shall be fully protected in relying on
the Prospectus and Statement of Additional Information as
previously furnished to the Subadviser. The Trust employs the
Manager as the manager to the Fund pursuant to a management
agreement dated August 1, 2006 (the Management Agreement), and
the Manager hereby appoints the Subadviser to act as subadviser
to the Fund. The Subadviser accepts the appointment and agrees to
furnish the services for the compensation set forth below.
2. Services as Subadviser
Subject to the supervision, direction and approval of the
Board of the Trust and the Manager, the Subadviser shall conduct
a continual program of investment, evaluation and, if appropriate
in the view of the Subadviser, sale and reinvestment of the
Fund?s assets. The Subadviser is authorized, in its sole
discretion and without prior consultation with the Manager, to:
(a) manage the Fund?s assets in accordance with the Fund?s
investment objective(s) and policies as stated in the Prospectus
and the Statement; (b) make investment decisions for the Fund;
(c) select brokers and dealers, and place purchase and sale
orders for portfolio transactions on behalf of the Fund; and (d)
employ professional portfolio managers and securities analysts
who provide research services to the Fund.
In addition, (i) the Subadviser shall furnish the Manager
daily information concerning portfolio transactions and quarterly
and annual reports concerning transactions and performance of the
Fund in such form as may be mutually agreed upon, and the
Subadviser agrees to review the Fund and discuss the management
of it with the Manager and the Board of Trustees of the Trust
whenever the Manager or the Board may reasonably request. The
Subadviser will assist the Manager and the Board of Trustees in
valuing and monitoring the valuation of portfolio securities held
by the Fund. The Subadviser will meet periodically with the
Manager and the Board of Trustees of the Trust at such times as
may be reasonably requested by the Manager or the Board. The
Subadviser will meet with third parties at the request of the
Manager at such times as the Subadviser and the Manager may agree
in writing from time to time.
(ii) Unless the Manager gives the Subadviser written
instructions to the contrary, the Subadviser shall use its good
faith judgment in a manner which it reasonably believes best
serves the interests of the Fund?s shareholders to vote or
abstain from voting all proxies solicited by or with respect to
the issuers of securities in which assets of the Fund may be
invested.
(iii) The Subadviser shall maintain compliance procedures for
the Fund that it reasonably believes are adequate to ensure that
the Subadviser?s management of the Fund?s assets is in compliance
with (A) the 1940 Act and the rules and regulations promulgated
thereunder and (B) the Fund?s investment objective(s) and
policies as stated in the Prospectus and Statement. The
Subadviser shall maintain compliance procedures that it
reasonably believes are adequate to ensure its compliance with
the Advisers Act.
(iv) The Subadviser has adopted a written code of ethics
that it reasonably believes complies with the requirements of
Rule 17j-1 under the 1940 Act, which it will provide to the
Trust. The Subadviser has policies and procedures regarding the
detection and prevention and the misuse of material, nonpublic
information by the Subadviser and its employees as required by
the Xxxxxxx Xxxxxxx and Securities Fraud Enforcement Act of 1988.
(v) The Subadviser shall maintain and preserve all books
and records required to be kept by the Subadviser with respect to
the services provided pursuant to this Agreement as are required
by rules adopted by the Securities and Exchange Commission (the
Commission) under Section 31(a) of the 1940 Act. The Subadviser
shall also furnish to the Manager any other information relating
to the assets of the Fund that is required to be filed by the
Manager or the Trust with the Commission or sent to shareholders
under the 1940 Act and the rules thereunder. The Subadviser
agrees that all records it maintains on behalf of the Fund are
the property of the Fund and the Subadviser will surrender
promptly to the Fund any of such records upon the Fund?s request,
provided, however, that the Subadviser may retain a copy of such
records.
(vi) Subject to the limitations on services for other
registered investment companies provided in section 10 hereof,
the Manager understands that the Subadviser now acts, will
continue to act and may act in the future as investment manager
or adviser to fiduciary and other managed accounts, and as
investment manager or adviser to other investment companies,
including any offshore entities, or accounts, and the Manager has
no objection to the Subadviser?s so acting, provided that
whenever the Fund and one or more other investment companies or
accounts managed or advised by the Subadviser have available
funds for investment, investments suitable and appropriate for
each will be allocated in accordance with a formula believed by
the Subadviser to be equitable to each company and account. The
Manager recognizes that in some cases this procedure may
adversely affect the size of the position obtainable for the
Fund. In addition, the Manager understands that the persons
employed by the Subadviser to assist in the performance of the
Subadviser?s duties under this Agreement will not devote their
full time to such service and nothing contained in this Agreement
shall be deemed to limit or restrict the right of the Subadviser
or any affiliate of the Subadviser to engage in and devote time
and attention to other businesses or to render services of
whatever kind or nature.
3. Brokerage
In selecting brokers or dealers (including, if permitted by
applicable law, Citigroup Global Markets Inc. or any other broker
or dealer affiliated with Citigroup Inc. or any broker or dealer
affiliated with the Manager or the Subadviser) to execute
transactions on behalf of the Fund, the Subadviser will seek the
best overall terms available. In assessing the best overall terms
available for any transaction, the Subadviser will consider
factors it deems relevant, including, but not limited to, the
breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In selecting
brokers or dealers to execute a particular transaction, and in
evaluating the best overall terms available, the Subadviser is
authorized to consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the Fund and/or other accounts
over which the Subadviser or its affiliates exercise investment
discretion. Nothing in this paragraph shall be deemed to prohibit
the Subadviser from paying an amount of commission for effecting
a securities transaction in excess of the amount of commission
another member of an exchange, broker, or dealer would have
charged for effecting that transaction, if the Subadviser
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 member, broker, or dealer, viewed in
terms of either that particular transaction or its overall
responsibilities with respect to the Fund and/or other accounts
over which the Subadviser or its affiliates exercise investment
discretion.
4. Information Provided to the Trust and the Manager
The Subadviser shall keep the Trust and the Manager informed
of developments materially affecting the Fund?s holdings, and
shall, on its own initiative, furnish the Trust and the Manager
from time to time with whatever information the Subadviser
believes is appropriate for this purpose. In addition, the
Subadviser shall supply all such information to the Board of the
Trust as the Board may request to enable the Board to review this
Agreement consistent with Sections 15 and 36 of the 1940 Act.
5. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Manager shall pay to the Subadviser out of the
management fee it receives from the Fund, and only to the extent
thereof, an annual fee calculated at the rate of 0.50% of the
Fund?s average daily net assets up to $1.5 billion and 0.40% of
the Fund?s average daily net assets in excess of $1.5 billion;
the fee is calculated daily and paid monthly. The Subadviser
shall have no right to obtain compensation directly from the
Trust for services provided hereunder and agrees to look solely
to the Manager for payment of fees due. The fee for the period
from the Effective Date (defined below) of the Agreement to the
end of the month during which the Effective Date occurs shall be
prorated according to the proportion that such period bears to
the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of
determining fees payable to the Subadviser, the value of the
Fund?s net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
6. Expenses
The Subadviser shall bear all expenses (excluding brokerage
costs, custodian fees, auditors fees or other expenses to be
borne by the Fund or the Trust) in connection with the
performance of its services under this Agreement. The Fund will
bear certain other expenses to be incurred in its operation,
including, but not limited to, investment advisory fees, sub-
advisory fees (other than sub-advisory fees paid pursuant to this
Agreement) and administration fees; fees for necessary
professional and brokerage services; costs relating to local
administration of securities; fees for any pricing service; the
costs of regulatory compliance, and pro rata costs associated
with maintaining the Trust?s legal existence and shareholder
relations. All other expenses not specifically assumed by the
Subadviser hereunder or by the Manager under the Management
Agreement are borne by the Fund or the Trust.
7. Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to the Management Agreement and any
other investment advisory or administration agreement, but
excluding interest, taxes, brokerage and extraordinary expenses)
exceed the expense limitation of any state having jurisdiction
over the Fund, the Subadviser shall reduce its fee by the
proportion of such excess expense equal to the proportion that
its fee hereunder bears to the aggregate of fees paid by the Fund
for management services in that year, to the extent required by
state law. A fee reduction pursuant to this paragraph 7, if any,
shall be estimated, reconciled and paid on a monthly basis. The
Manager confirms that, as of the date of this Agreement, no such
expense limitation is applicable to the Fund.
8. Standard of Care
The Subadviser shall exercise its best judgment and shall
act in good faith in rendering the services listed in paragraphs
2 and 3 above. The Subadviser shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the
Fund or the Manager in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall
be deemed to protect or purport to protect the Subadviser against
any liability to the Manager, the Trust or to the shareholders of
the Fund to which the Subadviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the
Subadviser?s reckless disregard of its obligations and duties
under this Agreement.
9. Term of Agreement
This Agreement shall become effective on August 1, 2006 (the
Effective Date) and shall continue for an initial two-year term
and shall continue thereafter so long as such continuance is
specifically approved at least annually as required by the 1940
Act. This Agreement is terminable, without penalty, (i) on 180
days? written notice by the Manager unless there has been a
material breach of any of the provisions of this Agreement by the
Subadviser, in which case this Agreement is terminable on 60
days? written notice by the Manager, (ii) on 60 days? written
notice by the Board of the Trust or by vote of holders of a
majority (as defined in the 1940 Act and the rules thereunder) of
the outstanding voting securities of the Fund, or (iii) upon 60
days? written notice by the Subadviser. This Agreement will also
terminate automatically in the event of its assignment (as
defined in the 1940 Act and the rules thereunder).
10. Exclusivity
During the term of this Agreement and any extension,
renewal, or amendment hereof, the Subadviser shall not serve as
adviser, manager or subadviser for any other investment company
registered under the 1940 Act and offered to retail investors,
other than The Olstein Financial Alert Fund, provided, however,
that the foregoing shall not apply if the Agreement has been
terminated by the Manager or the Trust, and provided, however,
that the foregoing shall not prevent the Subadviser from
rendering services as adviser, manager or subadviser to any
registered investment company approved in writing by the Manager
and the Board of Trustees of the Trust.
11. Notices
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party
at such address as such other party may designate for the receipt
of such notice. Until further notice to the other party, it is
agreed that the address of each party is as follows:
(a) To the Manager:
Xxxx Xxxxx Partners Fund Advisor, LLC
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) To the Subadviser:
Xxxxxxx & Associates, L.P.
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
12. Representations
Each party hereto represents that the Agreement has been
duly authorized, executed and delivered by all required corporate
action.
The Subadviser is organized as a partnership, and the
Subadviser agrees to notify the Manager of any changes in the
Subadviser?s general partners within a reasonable time after such
change. The Subadviser will promptly notify the Manager of any
financial condition that is likely to impair the Subadviser?s
ability to fulfill its obligations under this Agreement.
13. Governing Law
This Agreement is being made pursuant to, and shall be
construed in accordance with, the laws of the State of New York,
without giving effect to principles of conflict of laws.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance of this Agreement by signing and
returning the enclosed copy of this Agreement.
Very truly yours,
XXXX XXXXX PARTNERS FUND ADVISOR,
LLC
By:
Name:
Title:
XXXXXXX & ASSOCIATES, L.P.
By: Olstein Advisors, LLC, its
General Partner
By:
Name:
Title:
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