aExhibit 77Q1(e)
Xxxxxx Value Fund, Inc.
Form N-SAR for the period ended 11/30/97
File No. 811-5385
SUB-ADVISORY AGREEMENT
AGREEMENT made this 30th day of July, 1997, by and
between DREMAN VALUE ADVISORS, INC., a Delaware corporation
(the "Adviser") and DREMAN VALUE MANAGEMENT, L.L.C., formerly
known as Contrarian Investment Management, L.L.C., a Delaware
limited liability company (the "Sub-Adviser").
WHEREAS, XXXXXX VALUE FUND, INC., formerly known as
XXXXXX-XXXXXX FUND, INC., a Maryland corporation (the "Fund")
is a management investment company registered under the
Investment Company Act of 1940 ("the Investment Company
Act");
WHEREAS, the Fund has retained the Adviser to render to
it investment advisory and management services with regard to
the Fund, including the series known as the Xxxxxx-Xxxxxx
High Return Equity Fund (the "High Return Series"), pursuant
to an Investment Management Agreement (the "Management
Agreement"); and
WHEREAS, the Adviser desires at this time to retain the
Sub-Adviser to render investment advisory and management
services for the High Return Series and the Sub-Adviser is
willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. Appointment of Sub-Adviser.
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(a) The Adviser hereby employs the Sub-Adviser to
manage the investment and reinvestment of the assets of the
High Return Series in accordance with the applicable
investment objectives, policies and limitations and subject
to the supervision of the Adviser and the Board of Directors
of the Fund for the period and upon the terms herein set
forth, and to place orders for the purchase or sale of
portfolio securities for the High Return Series account with
brokers or dealers selected by the Sub-Adviser; and, in
connection therewith, the Sub-Adviser is authorized as the
agent of the High Return Series to give instructions to the
Custodian of the Fund as to the deliveries of securities and
payments of cash for the account of the High Return Series.
In connection with the selection of such brokers or dealers
and the placing of such orders, the Sub-Adviser is directed
to seek for the High Return Series best execution of orders.
Subject to such policies as the Board of Directors of the
Fund determines and subject to satisfying the requirements of
Section 28(e) of the Securities Exchange Act of 1934, the
Sub-Adviser shall not be deemed to have acted unlawfully or
to have breached any duty, created by this Agreement or
otherwise, solely by reason of its having caused the High
Return Series to pay a broker or dealer an amount of
commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-
Adviser 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 broker or
dealer viewed in terms of either that particular transaction
or the Sub-Adviser's overall responsibilities with respect to
the clients of the Sub-Adviser as to which the Sub-Adviser
exercises investment discretion. The Adviser recognizes that
all research services and research that the Sub-Adviser
receives are available for all clients of the Sub-Adviser,
and that the High Return Series and other clients of the
Sub-Adviser may benefit thereby. The investment of funds
shall be subject to all applicable restrictions of the
Articles of Incorporation and By-Laws of the Fund as may from
time to time be in force.
(b) The Sub-Adviser accepts such employment and
agrees during the period of this Agreement to render such
investment management services, to furnish related office
facilities and equipment and clerical, bookkeeping and
administrative services for the High Return Series, and to
assume the other obligations herein set forth for the
compensation herein provided. The Sub-Adviser shall assume
and pay all of the costs and expenses of performing its
obligations under this Agreement. The Sub-Adviser shall for
all purposes herein provided be deemed to be an independent
contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent
the Fund, the High Return Series or the Adviser in any way or
otherwise be deemed an agent of the Fund, the High Return
Series or the Adviser.
(c) The Sub-Adviser will keep the Adviser, for
itself and on behalf of the Fund, informed of developments
materially affecting the Fund or the High Return Series and
shall, on the Sub-Adviser's own initiative and as reasonably
requested by the Adviser, for itself and on behalf of the
Fund, furnish to the Adviser from time to time whatever
information the Adviser reasonably believes appropriate for
this purpose.
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(d) The Sub-Adviser shall provide the Adviser with
such investment portfolio accounting and shall maintain and
provide such detailed records and reports as the Adviser may
from time to time reasonably request, including without
limitation, daily processing of investment transactions and
periodic valuations of investment portfolio positions as
required by the Adviser, monthly reports of the investment
portfolio and all investment transactions and the preparation
of such reports and compilation of such data as may be
required by the Adviser to comply with the obligations
imposed upon it under the Management Agreement. Sub-Adviser
agrees to install in its offices computer equipment or
software, as provided by the Adviser at its expense, for use
by the Sub-Adviser in performing its duties under this
Sub-Advisory Agreement, including inputting on a daily basis
that day's portfolio transactions in the High Return Series.
(e) The Sub-Adviser shall maintain and enforce
adequate security procedures with respect to all materials,
records, documents and data relating to any of its
responsibilities pursuant to this Agreement including all
means for the effecting of securities transactions.
(f) The Sub-Adviser agrees that it will provide to
the Adviser or the Fund promptly upon request reports and
copies of such of its investment records and ledgers with
respect to the High Return Series as appropriate to assist
the Adviser and the Fund in monitoring compliance with the
Investment Company Act and the Investment Advisers Act of
1940 (the "Advisers Act"), as well as other applicable laws.
The Sub-Adviser will furnish the Fund's Board of Directors
such periodic and special reports with respect to the High
Return Series as the Adviser or the Board of Directors may
reasonably request, including statistical information with
respect to the High Return Series s securities.
(g) In compliance with the requirements of Rule
31a-3 under the Investment Company Act, the Sub-Adviser
xxxxxx agrees that any records that it maintains for the Fund
are the property of the Fund and further agrees to surrender
promptly any such records upon the Fund's or the Adviser's
request, although the Sub-Adviser may, at the Sub-Adviser's
own expense, make and retain copies of such records. The
Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Investment Company Act any
records with respect to the Sub-Adviser's duties hereunder
required to be maintained by Rule 31a-1 under the Investment
Company Act to the extent that the Sub-Adviser prepares and
maintains such records pursuant to this Agreement and to
preserve the records required by Rule 204-2 under the
Advisers Act for the period specified in that Rule.
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(h) The Sub-Adviser agrees that it will
immediately notify the Adviser and the Fund in the event that
the Sub-Adviser: (i) becomes subject to a statutory
disqualification that prevents the Sub-Adviser from serving
as an investment adviser pursuant to this Agreement; or (ii)
is or expects to become the subject of an administrative
proceeding or enforcement action by the United States
Securities and Exchange Commission ("SEC") or other
regulatory authority.
(i) The Sub-Adviser agrees that it will
immediately forward, upon receipt, to the Adviser, for itself
and as agent for the Fund, any correspondence from the SEC or
other regulatory authority that relates to the High Return
Series.
(j) The Sub-Adviser acknowledges that it is an
"investment adviser" to the Fund within the meaning of the
Investment Company Act and the Advisers Act.
(k) The Sub-Adviser shall be responsible for
maintaining an appropriate compliance program to ensure that
the services provided by it under this Agreement are
performed in a manner consistent with applicable laws and the
terms of this Agreement. Sub-Adviser agrees to provide such
reports and certifications regarding its compliance program
as the Adviser or the Fund shall reasonably request from time
to time. Furthermore, the Sub-Adviser shall maintain and
enforce a Code of Ethics which in form and substance is
consistent with industry norms as changed from time to time.
Sub-Adviser agrees to allow the Board of Directors of the
Fund to review its Code of Ethics upon request. Sub-Adviser
agrees to report to the Adviser on a quarterly basis any
violations of the Code of Ethics of which its senior
management becomes aware.
2. Compensation.
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For the services and facilities described herein,
the Adviser will pay to the Sub-Adviser, 15 days after the
end of each calendar month, a sub-advisory fee computed by
applying the annual rates set forth in Appendix A to the
applicable average daily net assets of the High Return
Series.
For the month and year in which this Agreement
becomes effective or terminates, there shall be an
appropriate proration on the basis of the number of days that
the Agreement is in effect during the month and year,
respectively.
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The Adviser further agrees that notwithstanding
Appendix A the minimum amounts payable to Sub-Adviser during
the following calendar years that Sub-Adviser serves under
this Agreement shall be $1.0 million in 1997 and $8 million
in each of 2000, 2001, and 2002 for services rendered during
each of those years. The payments, if any, made under the
foregoing sentence shall be made by January 15 of the year
immediately following the calendar year to which such payment
relates.
3. Net Asset Value. The net asset value for the
High Return Series shall be calculated as the Board of
Directors of the Fund may determine from time to time in
accordance with the provisions of the Investment Company Act.
On each day when net asset value is not calculated, the net
asset value of the High Return Series shall be deemed to be
the net asset value as of the close of business on the last
day on which such calculation was made for the purpose of the
foregoing computations.
4. Duration and Termination.
------------------------
(a) This Agreement shall become effective with
respect to the High Return Series on the date hereof and
shall remain in full force until December 31, 2002, unless
sooner terminated or not annually approved as hereinafter
provided. Notwithstanding the foregoing, this Agreement
shall continue in force through December 31, 2002, and from
year to year thereafter, only as long as such continuance is
specifically approved at least annually and in the manner
required by the Investment Company Act and the rules and
regulations thereunder, with the first annual renewal to be
coincident with the next renewal of the Management Agreement.
(b) This Agreement shall automatically terminate
in the event of its assignment or in the event of the
termination of the Management Agreement. In addition,
Adviser has the right to terminate this Agreement upon
immediate notice if the Sub-Adviser becomes statutorily
disqualified from performing its duties under this Agreement
or otherwise is legally prohibited from operating as an
investment adviser.
(c) This Agreement may be terminated at any time,
without the payment by the Fund of any penalty, by the Board
of Directors of the Fund, or by vote of a majority of the
outstanding voting securities of the High Return Series, or
by the Adviser. The Fund may effect termination of this
Agreement by action of the Board of Directors of the Fund or
by vote of a majority of the outstanding voting securities of
the High Return Series on sixty (60) days written notice to
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the Adviser and the Sub-Adviser. The Adviser may effect
termination of this Agreement on sixty (60) days written
notice to the Sub-Adviser.
(d) Sub-Adviser may not terminate this Agreement
prior to the third anniversary of the date of this Agreement.
Sub-Adviser may terminate this Agreement effective on or
after the third anniversary of the date of this Agreement
upon ninety (90) days written notice to the Adviser.
(e) The terms "assignment" and "vote of a majority
of the outstanding voting securities" shall have the meanings
set forth in the Investment Company Act and the rules and
regulations thereunder.
(f) Termination of this Agreement shall not affect
the right of the Sub-Adviser to receive payments on any
unpaid balance of the compensation described in Section 2
earned prior to such termination.
(g) The provisions of Section 9 shall survive the
termination of this Agreement.
5. Representations and Warranties. The Sub-Adviser
hereby represents and warrants as follows:
(a) The Sub-Adviser is registered with the SEC as
an investment adviser under the Advisers Act, and such
registration is current, complete and in full compliance with
all material applicable provisions of the Advisers Act and
the rules and regulations thereunder;
(b) The Sub-Adviser has all requisite authority to
enter into, execute, deliver and perform the Sub-Adviser's
obligations under this Agreement;
(c) The Sub-Adviser's performance of its
obligations under this Agreement does not conflict with any
law, regulation or order to which the Sub-Adviser is subject;
and
(d) The Sub-Adviser has reviewed the portion of
(i) the registration statement filed with the SEC, as amended
from time to time for the Fund ("Registration Statement"),
and (ii) the Fund's prospectus and supplements thereto, in
each case in the form received from the Adviser with respect
to the disclosure about the Sub-Adviser and the High Return
Series of which the Sub-Adviser has knowledge (the
"Sub-Adviser and High Return Information") and except as
advised in writing to the Adviser such Registration
Statement, prospectus and any supplement contain, as of its
date, no untrue statement of any material fact of which
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Sub-Adviser has knowledge and do not omit any statement of a
material fact of which Sub-Adviser has knowledge which was
required to be stated therein or necessary to make the
statements contained therein not misleading.
6. Covenants. The Sub-Adviser hereby covenants and
agrees that, so long as this Agreement shall remain in
effect:
(a) The Sub-Adviser shall maintain the
Sub-Adviser's registration as an investment adviser under the
Advisers Act, and such registration shall at all times remain
current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(b) The Sub-Adviser's performance of its
obligations under this Agreement shall not conflict with any
law, regulation or order to which the Sub-Adviser is then
subject;
(c) The Sub-Adviser shall at all times comply with
the Advisers Act and the Investment Company Act, and all
rules and regulations thereunder, and all other applicable
laws and regulations, and the Registration Statement,
prospectus and any supplement and with any applicable
procedures adopted by the Fund's Board of Directors, provided
that such procedures are substantially similar to those
applicable to similar funds for which the Board of Directors
of the Fund is responsible and that such procedures are
identified in writing to the Sub-Adviser;
(d) The Sub-Adviser shall promptly notify Adviser
and the Fund upon the occurrence of any event that might
disqualify or prevent the Sub-Adviser from performing its
duties under this Agreement. The Sub-Adviser further agrees
to notify Adviser of any changes that would cause the
Registration Statement or prospectus for the Fund to contain
any untrue statement of a material fact or to omit to state a
material fact which is required to be stated therein or is
necessary to make the statements contained therein not
misleading, in each case relating to Sub-Adviser and High
Return Information; and
(e) For the entire time this Agreement is in
effect and for a period of two years thereafter, the Sub-
Adviser shall maintain a claims made bond issued by a
reputable fidelity insurance company against larceny and
embezzlement, covering each officer and employee of Sub-
Adviser, at a minimum level of $2 million which provide
coverage for acts or alleged acts which occurred during the
period of this Agreement.
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7. Use of Names.
------------
(a) The Sub-Adviser acknowledges and agrees that
the names Xxxxxx Value Fund, Xxxxxx, and Zurich, and
abbreviations or logos associated with those names, are the
valuable property of Adviser and its affiliates; that the
Fund, Adviser and their affiliates have the right to use such
names, abbreviations and logos; and that the Sub-Adviser
shall use the names Xxxxxx Value Fund, Xxxxxx and Zurich, and
associated abbreviations and logos, only in connection with
the Sub-Adviser's performance of its duties hereunder.
Further, in any communication with the public and in any
marketing communications of any sort, Sub-Adviser agrees to
obtain prior written approval from Adviser before using or
referring to Xxxxxx Value Fund, Xxxxxx, Zurich,
or Xxxxxx-Xxxxxx High Return Equity Fund or any abbreviations
or logos associated with those names; provided that nothing
herein shall be deemed to prohibit the Sub-Adviser from
referring to the performance of the Xxxxxx-Xxxxxx High Return
Equity Fund in the Sub-Adviser's marketing material as long
as such marketing material does not constitute "sales
literature" or "advertising" for the High Return Series, as
those terms are used in the rules, regulations and guidelines
of the SEC and the National Association of Securities
Dealers, Inc.
(b) Adviser acknowledges that "Dreman" is
distinctive in connection with investment advisory and
related services provided by the Sub-Adviser, the "Dreman"
name is a property right of the Sub-Adviser, and the "Dreman"
name as used in the name of the High Return Series is
understood to be used by the Fund upon the conditions
hereinafter set forth; provided that the Fund may use such
name only so long as the Sub-Adviser shall be retained as the
investment sub-adviser of the High Return Series pursuant to
the terms of this Agreement.
(c) Adviser acknowledges that the Fund and its
agents may use the "Dreman" name in the name of the High
Return Series for the period set forth herein in a manner not
inconsistent with the interests of the Sub-Adviser and that
the rights of the Fund and its agents in the "Dreman" name
are limited to their use as a component of the High Return
Series name and in connection with accurately describing the
activities of the High Return Series, including use with
marketing and other promotional and informational material
relating to the High Return Series. In the event that the
Sub-Adviser shall cease to be the investment sub-adviser of
the High Return Series, then the Fund at its own or the
Adviser's expense, upon the Sub-Adviser's written request:
(i) shall cease to use the Sub-Adviser's name as part of the
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name of the High Return Series or for any other commercial
purpose (other than the right to refer to the High Return
Series's former name in the Fund's Registration Statement,
proxy materials and other Fund documents to the extent
required by law and, for a reasonable period the use of the
name in informing others of the name change); and (ii) shall
use its best efforts to cause the Fund's officers and
directors to take any and all actions which may be necessary
or desirable to effect the foregoing and to reconvey to the
Sub-Adviser all rights which the Fund may have to such name.
Adviser agrees to take any and all reasonable actions as may
be necessary or desirable to effect the foregoing and Sub-
Adviser agrees to allow the Fund and its agents a reasonable
time to effectuate the foregoing.
(d) The Sub-Adviser hereby agrees and consents to
the use of the Sub-Adviser's name upon the foregoing terms
and conditions.
8. Standard of Care. Except as may otherwise be
required by law, and except as may be set forth in paragraph
9, the Sub-Adviser shall not be liable for any error of
judgment or of law or for any loss suffered by the Fund, the
High Return Series or the Adviser in connection with the
matters to which this Agreement relates, except loss
resulting from willful misfeasance, bad faith or gross
negligence on the part of the Sub-Adviser in the performance
of its obligations and duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
9. Indemnifications.
----------------
(a) The Sub-Adviser agrees to indemnify and hold
harmless Adviser and the Fund against any losses, expenses,
claims, damages or liabilities (or actions or proceedings in
respect thereof), to which Adviser or the Fund may become
subject arising out of or based on the breach or alleged
breach by the Sub-Adviser of any provisions of this
Agreement; 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 the Sub-
Adviser and the Adviser or the Fund, as the case may be,
shall have concluded in a written opinion, that such loss,
expense, claim, damage or liability resulted primarily from
the Adviser's or the Fund's willful misfeasance, bad faith or
gross negligence or by reason of the reckless disregard by
the Adviser or the Fund of its duties. The foregoing
indemnification shall be in addition to any rights that the
Adviser or the Fund may have at common law or otherwise. The
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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 the Adviser or
the Fund and their affiliates, directors, officers, employees
and agents. The Sub-Adviser's agreement in this paragraph
shall also extend to any of the Fund's, High Return Series's,
and Adviser's successors or the successors of the
aforementioned affiliates, directors, officers, employees or
agents.
(b) The Adviser agrees to indemnify and hold
harmless the Sub-Adviser against any losses, expenses,
claims, damages or liabilities (or actions or proceedings in
respect thereof), to which the Sub-Adviser may become subject
arising out of or based on the breach or alleged breach by
the Adviser of any provisions of this Agreement or the
Management Agreement, or any wrongful action or alleged
wrongful action by the Adviser or its affiliates in the
distribution of the Fund's shares, or any wrongful action or
alleged wrongful action by the Fund other than wrongful
action or alleged wrongful action that was caused by the
breach by Sub-Adviser of the provisions of this Agreement;
provided, however, that the 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 the Adviser 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. The 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 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 affiliates, directors, officers, employees and
agents. The Adviser's 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 paragraphs 9(a) and 9(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 so to notify the indemnifying party shall not
relieve it from any liability which it may otherwise have to
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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 part 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 reasonable legal fees and other
costs of 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, which shall not be
unreasonably withheld.
10. Survival. If any provision of this Agreement
shall be held or made invalid by a court decision, statute,
rule or otherwise, the remainder shall not be thereby
affected.
11. Notices. Any notice under this Agreement shall
be in writing, addressed and delivered or mailed, postage
prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
12. Governing Law. This Agreement shall be
construed in accordance with applicable federal law and the
laws of the State of New York.
13. Miscellaneous.
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(a) 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.
(b) Terms not defined herein shall have the
meaning set forth in the Fund's prospectus.
(c) This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an
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original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have
caused this Agreement to be executed as of the day and year
first above written.
DREMAN VALUE ADVISORS, INC.
By: /s/ Xxxxx X. Xxxx
--------------------------------
Title: President & CEO
-----------------------------
DREMAN VALUE MANAGEMENT, L.L.C.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Title: Chairman
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APPENDIX A
INVESTMENT MANAGEMENT SUBADVISORY FEE
Applicable Average
Daily Net Assets
(Thousands) Annual Rate
------------------ -----------
$0 - $ 250,000 .240 of 1%
$ 250,000 - $ 1,000,000 .230 of 1%
$ 1,000,000 - $ 2,500,000 .224 of 1%
$ 2,500,000 - $ 5,000,000 .218 of 1%
$ 5,000,000 - $ 7,500,000 .208 of 1%
$ 7,500,000 - $10,000,000 .205 of 1%
$10,000,000 - $12,500,000 .202 of 1%
Over $12,500,000 .198 of 1%
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