EX-99.B(d)
INTERIM INVESTMENT ADVISORY AGREEMENT
AGREEMENT, entered into as of this 21st day of September, between Pilgrim
Xxxxxx & Associates, Ltd. (the "Adviser") and The PBHG Funds, Inc. (the "Fund").
WHEREAS, the Fund is a Maryland corporation and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act");
WHEREAS, the Adviser provides invest advisory services to all of the
Portfolios of the Fund listed on Schedule A hereto (the "Portfolios") and with
respect to certain Portfolios ("Sub-Advised Portfolios") provides investment
advisory services using sub-advisers ("Sub-Advisers") (both the Sub-Advised
Portfolios and the Sub-Advisers are listed on Schedule B hereto);
WHEREAS, United Asset Management, Inc., is about to be acquired by an
affiliate of Old Mutual, PLC in a transaction that will result in an assignment
as that term is defined in the 1940 Act;
WHEREAS, the Adviser's current investment advisory agreement (including the
current investment sub-advisory agreements for the Sub-Advisers) (the "Prior
Investment Advisory Agreement") with the Fund on behalf of the Portfolios will
terminate upon their "assignment" as that term is defined under the 1940 Act,
and the Adviser and the Sub-Advisers are willing to continue to furnish such
services to the Portfolios under this interim investment advisory agreement (and
related interim investment sub-advisory agreements) until a new investment
advisory agreement and new investment sub-advisory agreements are approved by
the directors of the Fund and the shareholders of the Portfolios as required by
Section 15 of the 1940 Act;
WHEREAS, the Fund wishes to continue to retain the Adviser and the
Sub-Advisers to render investment advisory services to the Fund and the Adviser
and the Sub-Advisers are willing to furnish such services to the Portfolios and
the Sub-Advised Portfolios;
WHEREAS, the Fund, the Adviser and the Sub-Advisers desire to comply with
the provisions of Rule 15a-4 including subsection (b) thereof under the 1940
Act; and
WHEREAS, the directors of the Fund, including a majority of those directors
who are not interested persons of the Fund, have found that the scope and
quality of services to be provided
to the Fund under this Agreement will be at least equivalent to the scope and
quality of services provided under the Prior Investment Advisory Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Fund and the Adviser as follows:
1. APPOINTMENT. The Fund hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms in this Agreement. The
Adviser accepts such appointment and agrees to furnish the services herein set
forth, for the compensation herein provided.
2. INVESTMENT ADVISORY DUTIES. Subject to the supervision of the Directors
of the Fund, the Adviser will, (a) provide a program of continuous investment
management for the Portfolios in accordance with the Portfolios' investment
objectives, policies and limitations as stated in each Portfolio's Prospectus
and Statement of Additional Information included as part of the Fund's
Registration Statement filed with the Securities and Exchange Commission, as
they may be amended from time to time, copies of which shall be provided to the
Adviser by the Fund; (b) make investment decisions for the Funds; and (c) place
orders to purchase and sell securities for the Portfolios.
In performing its investment management services to the Portfolios hereunder,
the Adviser will provide the Portfolios with ongoing investment guidance and
policy direction, including oral and written research, analysis, advice,
statistical and economic data and judgments regarding individual investments,
general economic conditions and trends and long-range investment policy. The
Adviser will determine the securities, instruments, repurchase agreements,
options, futures and other investments and techniques that the Portfolios will
purchase, sell, enter into or use, and will prove an ongoing evaluation of the
Portfolios' investments. The Adviser will determine what portion of the
Portfolios' investments shall be invested in securities and other assets, and
what portion, if any, should be held uninvested. The Adviser shall furnish to
the Fund adequate (i) office space, which may be space within the offices of
Adviser or in such other place as may be agreed upon from time to time and (ii)
office furnishings, facilities and equipment as may be reasonably required for
managing the corporate affairs and conducting the business of the Fund,
including complying with the corporate reporting requirements of the various
states in which the Fund does business, and conducting correspondence and other
communications with the stockholders of the Fund. The Adviser shall employ or
provide and compensate the executive, secretarial and clerical personnel
necessary to provide such services. Subject to the approval of the Fund's Board
of Directors (including a majority of the Directors who are not "interested
persons" of the Fund as defined in the 0000 Xxx) and of the shareholders of the
Fund, the Adviser may delegate to a sub-adviser some or all of its duties
enumerated in Section 2 hereof. The Adviser shall continue to supervise the
performance of any such sub-adviser and shall report regularly thereon to the
Fund's Board of Directors. The Adviser further agrees that, in performing its
duties hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code"), and all other
applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Directors;
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(b) use reasonable efforts to manage each Portfolio so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder;
(c) place orders pursuant to its investment determinations for each
Portfolio directly with the issuer, or with any broker or dealer, in
accordance with the applicable policies expressed in each Portfolio's
Prospectus and/or Statement of Additional Information and in accordance
with applicable legal requirements;
(d) furnish to the Fund whatever statistical information the Fund may
reasonably request with respect to each Portfolio's assets or contemplated
investments. In addition, the Adviser will keep the Fund and the Directors
informed of developments materially affecting each Portfolio's investments
and shall, on the Adviser's own initiative, furnish to the Fund from time
to time whatever information the Adviser believes appropriate for this
purpose;
(e) make available to the Fund, promptly upon its request, such copies
of the Adviser's investment records and ledgers with respect to the
Portfolios as may be required to assist the Fund in its compliance with
applicable laws and regulations. The Adviser will furnish the Directors
with such periodic and special reports regarding each Portfolio as they may
reasonably request; and
(f) immediately notify the Fund in the event that the Adviser or any
of its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment
adviser pursuant to this Agreement; or (2) becomes aware that it is the
subject of an administrative proceeding or enforcement action by the
Securities and Exchange Commission ("SEC") or other regulatory authority.
The Adviser further agrees to notify the Fund immediately of any material
fact known to the Adviser respecting or relating to the Adviser that is not
contained in the Fund's Registration Statement, or any amendment or
supplement thereto, but that is required to be disclosed therein, and of
any statement contained therein that becomes untrue in any material
respect.
3. ADDITIONAL SERVICES. If the Fund so requests, the Adviser shall also
maintain all internal bookkeeping, accounting and auditing services and records
in connection with maintaining the Fund's financial books and records, and shall
calculate each Portfolio's daily net asset value. For these services, each
Portfolio shall pay to the Adviser a monthly fee, which shall be in addition to
the fees payable pursuant to Section 5, to reimburse the Adviser for its costs,
without profit, for performing such services.
4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically
provided in this Section 4, the Adviser shall pay the compensation and expenses
of all its directors, officers and employees who serve as officers and executive
employees of the Fund (including the Fund's share of payroll taxes for such
persons), and the Adviser shall make available, without expense to the Fund, the
service of its directors, officers and employees who
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may be duly-elected officers of the Fund, subject to their individual consent to
serve and to any limitations imposed by law.
The Adviser shall not be required to pay any expenses of the Fund other than
those specifically allocated to the Adviser in this Section 4. In particular,
but without limiting the generality of the foregoing, the Adviser shall not be
responsible, except to the extent of the reasonable compensation of such of the
Fund's employees as are officers or employees of the Adviser whose services may
be involved, for the following expenses of the Fund: organization and certain
offering expenses of the Fund (including out-of-pocket expenses, but not
including the Adviser's overhead and employee costs); fees payable to the
Adviser and to any other Fund advisers or consultants; legal expenses, auditing
and accounting expenses; interest expenses; telephone, telex, facsimile, postage
and other communications expenses; taxes and governmental fees; fees, dues and
expenses incurred by or with respect to the Fund in connection with membership
in investment company trade organizations; costs of insurance relating to
fidelity coverage for the Fund's officers and employees; fees and expenses of
the Fund's custodian, any sub-custodian, transfer agent, registrar, or dividend
disbursing agent; payments to the Adviser for maintaining the Fund's financial
books and records and calculating the daily net asset value pursuant to Section
3 hereof; other payments for portfolio pricing or valuation services to pricing
agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates; other expenses in connection with the issuance,
offering, distribution, sale or redemption of securities issued by the Fund;
expenses relating to investor and public relations; expenses of registering and
qualifying shares of the Fund for sale, freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
or other assets of the Fund, or of entering into other transactions or engaging
in any investment practices with respect to the Fund; expenses of printing and
distributing Prospectuses, Statements of Additional Information, reports,
notices and dividends to stockholders; costs of stationery; any litigation
expenses; costs of stockholders' meetings; the compensation and all expenses
(specifically including travel expenses relating to the Fund's business) of
officers, directors and employees of the Fund who are not interested persons of
the Adviser; and travel expenses (or an appropriate portion thereof) of officers
or directors of the Fund who are officers, directors or employees of the Adviser
to the extent that such expenses relate to attendance at meetings of the Board
of Directors of the Fund with respect to matters concerning the Fund, or any
committees thereof or advisers thereto.
5. COMPENSATION. The compensation earned under this Agreement is set forth
with respect to each Portfolio in Schedule A (attached hereto). Such
compensation will be held in interest-bearing escrow accounts for each Portfolio
with the Fund's custodian bank. If a majority of a Portfolio's outstanding
voting securities (as defined in the 0000 Xxx) approve a new contract with the
Adviser by the end of the 150-day period (commencing on the date of "assignment"
(the "Assignment Date")), the amount in such escrow account (including interest
earned) will be paid to the Adviser upon the date of such approval by each
Portfolio. If a majority of the Fund's outstanding voting securities do not
approve a contract with the Adviser by the end of such 150 day period, the
Adviser will be paid, out of the escrow account, the lessor of: (i) Any costs
incurred in performing the interim contract (plus interest earned on that amount
while in escrow); or (ii) The total amount in the escrow account (plus interest
earned).
With respect to the interim investment sub-advisory agreements to be entered
into with each separate Sub-Adviser, if a majority of a specific Portfolio's
outstanding voting securities (as defined in the 0000 Xxx) approve a new
contract with the Sub-Adviser by the end of the 150-day period (commencing on
the Assignment Date), the amount in the escrow account (including interest
earned) will be paid to the
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Adviser upon the date of such approval by each such Portfolio. If a majority of
the Fund's outstanding voting securities do not approve a contract with the
Sub-Adviser by the end of such 150 day period, the Adviser be paid, out of the
escrow account, the lessor of: (i) Any costs incurred in performing the interim
contract (plus interest earned on that amount while in escrow); or (ii) The
total amount in the escrow account (plus interest earned).
As compensation for the services provided and expenses assumed by the Adviser
under this Agreement, except for any additional services provided by the Adviser
pursuant to Section 3 hereof, each Portfolio will place in escrow for the
Adviser at the end of each calendar month an advisory fee as set forth in
Schedule A hereto. In the event that the assignment occurs before the end of a
month, the compensation earned for the period of time before and including the
Assignment Date will be paid to the Adviser, and the compensation earned after
the Assignment Date will be deposited in escrow. The advisory fee is computed
daily as a percentage of each portfolio's average daily net assets. The "average
daily net assets" of a Portfolio shall mean the average of the values placed on
the Portfolio's net assets as of 4:00 p.m. (Eastern time) on each day on which
the net asset value of the Portfolio is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Portfolio lawfully
determines the value of its net assets as of some other time on each business
day, as of such other time. The value of net assets of the Portfolio shall
always be determined pursuant to the applicable provisions of the Fund's
Articles of Incorporation, and the Registration Statement. If, pursuant to such
provisions, the determination of net asset value is suspended for any particular
business day, then for the purposes of this Section 5, the value of the net
assets of the Portfolio as last determined shall be deemed to be the value of
its net assets as of the close of regular trading on the New York Stock
Exchange, or as of such other time as the value of the net assets of the
Portfolio's securities may lawfully be determined, on that day. If the
determination of the net asset value of the shares of a Portfolio has been so
suspended for a period including any month and when the Adviser's compensation
is payable at the end of such month, then such value shall be computed on the
basis of the value of the net assets of the Portfolio as last determined
(whether during or prior to such month). If the Portfolio determines the value
of the net assets more than once on any day, then the last such determination
thereof on that day shall be deemed to be the sole determination thereof on that
day for the purposes of this Section 5.
6. BOOKS AND RECORDS. The Adviser agrees to maintain such books and records
with respect to its services to the Fund as are required by Section 31 under the
1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Adviser also
agrees that records it maintains and preserves pursuant to Rules 31a-1 and 31a-2
under the 1940 Act and otherwise in connection with its services hereunder are
the property of the Fund and will be surrendered promptly to the Fund upon its
request. And the Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable law and regulations.
7. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Adviser shall exercise
its best judgment in rendering the services provided by it under this Agreement.
The Adviser shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund or the holders of the Fund's shares in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport
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to protect the Adviser against any liability to the Fund or to holders of the
Fund's shares to which the Adviser 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 Adviser's reckless disregard of
its obligations and duties under this Agreement. As used in this Section 7, the
term "Adviser" shall include any officers, directors, employees or other
affiliates of the Adviser performing services with respect to the Fund.
8. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Adviser are not exclusive, and that nothing in this Agreement shall prevent the
Adviser from providing similar services to other investment companies or to
other series of investment companies, or from engaging in other activities,
provided such other services and activities do not, during the term of the
Agreement, interfere in a material manner with the Adviser's ability to meet its
obligations to the Fund hereunder. When the Adviser recommends the purchase or
sale of the same security for a Portfolio, it is understood that in light of its
fiduciary duty to the Portfolio, such transactions will be executed on a basis
that is fair and equitable to the Portfolio. In connection with purchases or
sales of portfolio securities for the account of a Portfolio, neither the
Adviser nor any of its directors, officers, or employees shall act as principal
or agent or receive any commission provided that portfolio transactions for a
Portfolio may be executed through firms affiliated with the Adviser, in
accordance with applicable legal requirements. If the Adviser provides any
advice to its clients concerning the shares of the Fund, the Adviser shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
9. DURATION AND TERMINATION. This Agreement shall commence on the date on
which the Prior Investment Advisory Agreement is terminated by its assignment
(the "Assignment Date") and continue until, the sooner of the date: (i) With
respect to a portfolio, the date when a new investment advisory agreement is
approved by the directors and a majority (as defined in the 0000 Xxx) of a
Portfolio's outstanding voting securities (as defined in the 1940 Act); or (ii)
One hundred and fifty (150) days from the Assignment Date. Once an individual
Portfolio listed on Schedule A hereto receives approval from a majority of the
outstanding voting securities as required by section (i) above, that individual
Portfolio will be deemed to have terminated this Agreement and be governed by
the new investment advisory agreement. Notwithstanding the foregoing, this
Agreement may be terminated as to a Portfolio (a) at any time without penalty by
the Fund upon the vote of a majority of the Directors or by vote of the majority
of the Portfolio's outstanding voting securities, upon ten (10) days' written
notice to the Adviser or (b) by the Adviser at any time without penalty, upon
sixty (60) days' written notice to the Fund. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act), but
not including the assignment referenced in the first sentence of this section.
10. AMENDMENTS. 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 an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Directors, including a
majority of Directors who are not interested persons of any party to this
Agreement, cast in
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person at a meeting called for the purpose of voting on such approval, if such
approval is required by applicable law.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the
SEC thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) 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 hereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Adviser as
an agent of the Fund.
IN WITNESS WHEREFORE, the parties hereto have caused this Agreement to be
executed by their officers designated below as of
THE PBHG FUNDS, INC. PILGRIM XXXXXX & ASSOCIATES,
LTD.
By: /s/ Xxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxxxx
Title: CFO Title: CFO
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INVESTMENT ADVISORY AGREEMENT
SCHEDULE A
Pursuant to Section 5 of this Agreement, each Portfolio shall place in
escrow for the Adviser, at the end of each calendar month, compensation computed
daily at an annual rate of the Portfolio's average daily net assets as follows:
The PBHG Funds, Inc. Fee
PBHG Growth Fund (4/28/95) 0.85%
PBHG Emerging Growth Fund (4/28/95) 0.85%
PBHG International Fund (4/28/95) 1.00%
PBHG Large Cap Growth Fund (4/28/95) 0.75%
PBHG Select Equity Fund (4/28/95) 0.85%
PBHG Cash Reserves Fund (4/28/95) 0.30%
PBHG Technology & Communications Fund (4/28/95) 0.85%
PBHG Core Growth Fund (4/28/95) 0.85%
PBHG Limited Fund (4/28/95) 1.00%
PBHG Large Cap 20 Fund (4/28/95) 0.85%
PBHG Large Cap Value Fund (4/28/95) 0.65%
PBHG Mid-Cap Value Fund (4/l/97) 0.85%
PBHG Strategic Small Company Fund (4/28/95) 1.00%
PBHG Small Cap Value Fund (4/l/97) 1.00%
PBHG Focused Value Fund (12/4/98) 0.85%
PBHG New Opportunities Fund (1/25/99) 1.00%
PBHG Global Technology & Communications Fund (4/4/00) 1.50%
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SCHEDULE B
INVESTMENT SUB-ADVISORY ARRANGEMENTS
Pilgrim Xxxxxx Value Investors, Inc.
PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Strategic Small Company Fund
PBHG Small Cap Value Fund
PBHG Focused Value Fund
Xxxxxx Xxxxxxxxx
PBHG International Fund
Wellington
PBHG Cash Reserves Fund
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INTERIM INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 21st day of September, by and among Pilgrim
Xxxxxx & Associates, Ltd. (the "Adviser"), Pilgrim Xxxxxx Value Investors, Inc.
(the "Sub-Adviser") and The PBHG Funds, Inc., a Maryland corporation (the
"Company").
WHEREAS, the Company is a Maryland corporation and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company;
WHEREAS, pursuant to the Interim Investment Advisory Agreement dated
September 21, 2000 and Schedule A dated September 21, 2000 between the Adviser
and the Company, the Adviser will act as investment adviser to the separate
portfolios of the Company (the "Portfolios") specified in Schedule A;
WHEREAS, the Adviser and the Company each desire to retain the Sub-Adviser
to provide investment advisory services to the Company in connection with the
management of the Portfolios, and the Sub-Adviser is willing to render such
investment advisory services;
WHEREAS, United Asset Management, Inc., the parent of both the Sub-Adviser
and the Adviser, is about to be acquired by an affiliate of Old Mutual, plc in a
transaction that will result in an assignment as that term is defined in the
1940 Act;
WHEREAS, the Adviser's current investment advisory agreement and the
Sub-Adviser's current investment sub-advisory agreements (the "Prior Investment
Advisory Agreements") with the Company on behalf of the Portfolios will
terminate upon their "assignment" as that term is defined under the 1940 Act;
WHEREAS, the Adviser and the Sub-Adviser are willing to continue to furnish
such services to the Portfolios under this interim investment sub-advisory
agreement until a new investment advisory agreement and new investment
sub-advisory agreement are approved by the directors of the Company and the
shareholders of the Portfolios as required by Section 15 of the 1940 Act;
WHEREAS, the Company, the Adviser and the Sub-Advisers desire to comply
with the provisions of Rule 15a-4 including subsection (b) thereof under the
1940 Act; and
WHEREAS, the directors of the Company, including a majority of those
directors who are not interested persons of the Company, have found that the
scope and quality of services to be provided to the Company under this Agreement
will be at least equivalent to the scope and quality of services provided under
the Prior Investment Advisory Agreements.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of the
Portfolios and the composition of the Portfolios' investment portfolios,
including the purchase, retention and disposition thereof, in accordance with
the Portfolios' investment objectives, policies and restrictions as stated in
such Portfolios' Prospectus (such Prospectus and Statement of Additional
Information as currently in effect and as amended or supplemented from time to
time, being herein called the "Prospectus"), and subject to the following
understandings:
(1) The Sub-Adviser shall provide supervision of the Portfolios'
investments and determine from time to time what investments and securities will
be purchased, retained or sold by the Portfolios, and what portion of the assets
that be invested or held uninvested in cash.
(2) In the performance of its duties and obligations under this Agreement,
the Sub-Adviser shall act in conformity with the Company's Articles of
Incorporation and the Prospectus and with the instructions and directions of the
Adviser and of the Board of Directors and will conform and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, and
all other applicable federal and state laws and regulations, as each is amended
from time to time.
(3) The Sub-Adviser shall determine the securities to be purchased or sold
by the Portfolios and will place orders with or through such persons, brokers or
dealers to carry out the policy with respect to brokerage set forth in such
Portfolios' Registration Statement (as defined herein) and Prospectus or as the
Board of Directors or the Adviser may direct from time to time, in conformity
with federal securities laws. In providing the Portfolios with investment
supervision, the Sub-Adviser will give primary consideration to securing the
most favorable price and efficient execution. Within the framework of this
policy, the Sub-Adviser may consider the financial responsibility, research and
investment information and other services provided by brokers or dealers who may
effect or be a party to any such transaction or other transactions to which the
Sub-Adviser's other clients may be a party. It is understood that it is
desirable for the Portfolios that the Sub-Advisor have access to supplemental
investment and market research and security and economic analysis provided by
brokers who may execute brokerage transactions at a higher cost to the
Portfolios than may result when allocating brokerage to other brokers on the
basis of seeking the most favorable price and efficient execution. Therefore,
the Sub-Adviser is authorized to place orders for the purchase and sale of
securities for the Portfolios with brokers, subject to review by the Company's
Board of Directors from time to time with respect to the extent and continuation
of this practice. It is understood that the services provided by such brokers
may be useful to the Sub-Adviser in connection with the Sub-Adviser's services
to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of a Portfolio as well as other clients of the
Sub-Adviser, the Sub-
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Adviser, to the extent permitted by, applicable laws and regulations, may, but
shall be under no obligation to, aggregate the securities to be so purchased or
sold in order to obtain the most favorable price or lower brokerage commissions
and efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by the Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Portfolios in question and to
such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect to
the Portfolios' portfolio transactions required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and
shall render to the Company's Board of Directors such periodic and special
reports as the Company's Board of Directors may reasonably request.
(5) The Sub-Adviser shall provide the Portfolios' Custodian on each
business day with information relating to all transactions concerning the
Portfolios' assets and shall provide the Adviser with such information upon
request of the Adviser.
(6) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser shall be free
to render similar services to others, as long as such services do not impair the
services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's officers or employees.
It is understood that the Sub-Adviser may obtain certain administrative
services, including, without limitation, services relating to trade
reconciliation and the production of client reports, from its parent company in
carrying out its obligations under this Agreement.
(c) The Sub-Adviser shall keep the Portfolios' books and records required
to be maintained by the Sub-Adviser pursuant to paragraph 1(a) of this Agreement
and shall timely furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by the Adviser to keep the
other books and records of the Portfolios required by Rule 31a-1 under the 1940
Act. The Sub-Adviser agrees that all records that it maintains on behalf of the
Portfolio are property of the Portfolios and the Sub-Adviser will surrender
promptly to a Portfolio any of such records upon that Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of such records. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be maintained by it
pursuant to paragraph 1(a) of this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to the Portfolio pursuant to the Advisory Agreement and shall oversee
and review the Sub-Adviser's performance of its duties under this Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
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(a) Articles of Incorporation, as filed with the Secretary of State of
Maryland (such Articles of Incorporation as in effect on the date of this
Agreement, and as amended from time to time, are herein called the
"Articles of Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the date of
this Agreement, and as amended from time to time, are herein called the
"ByLaws");
(c) Certified resolutions of the Company's Board of Directors
authorizing the appointment of the Sub-Adviser and the Sub-Adviser and
approving the form of this Agreement;
(d) Registration Statements under the 1940 Act and the Securities Act
of 1933, as amended on Form N-1A (the "Registration Statement") as filed
with the Securities and Exchange Commission (the "Commission") relating to
the Portfolios and shares of the Portfolios' beneficial shares, and all
amendments thereto;
(e) Notification of Registration of the Company under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of the Company.
4. For the services to be provided by the Sub-Adviser pursuant to this Agreement
for the Portfolios, the Adviser will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate specified in Schedule A. This fee will be paid
to the Sub-Adviser from the Adviser's advisory fee for such Portfolio. Such
compensation will be held in interest-bearing escrow accounts for each Portfolio
with the Fund's custodian bank, if a majority of a specific Portfolio's
outstanding voting securities (as defined in the 0000 Xxx) approve a new
contract with the Sub-Adviser by the end of the 150-day period (commencing on
the Assignment Date), the amount in the escrow account (including interest
earned) will be paid to the Adviser, and the Adviser will pay to the Sub-Adviser
the fee specified in Schedule A, upon the date of such approval by each such
Portfolio. If a majority of a Portfolio's outstanding voting securities do not
approve a contract with the Sub-Adviser by the end of such 150 day period, the
Sub-Adviser shall be paid, out of the escrow account, the lessor of: (i) Any
costs incurred in performing the interim contract (plus interest earned on that
amount while in escrow); or (ii) The total amount in the escrow account (plus
interest earned).
5. The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by a Portfolio or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this
4
Agreement, except as may otherwise be provided under provisions of applicable
state law which cannot be waived or modified hereby.
6. This Agreement shall commence on the date on which the Prior Investment
Advisory Agreement is terminated by its assignment (the "Assignment Date") and
continue until, the sooner of the date: (i) With respect to a Portfolio, the
date when a new investment advisory agreement is approved by the directors and a
majority (as defined in the 0000 Xxx) of a Portfolio's outstanding voting
securities (as defined in the 1940 Act); or (ii) One hundred and fifty (150)
days from the Assignment Date. Once an individual Portfolio listed on Schedule A
hereto receives approval from a majority of the outstanding voting securities as
required by section (i) above, that individual Portfolio will be deemed to have
terminated this Agreement and be governed by the new investment advisory and
sub-advisory agreements. Notwithstanding the foregoing, this Agreement may be
terminated as to a Portfolio (a) at any time without penalty by the Company upon
the vote of a majority of the Directors or by vote of the majority of the
Portfolio's outstanding voting securities, upon ten (10) days' written notice to
the Adviser or (b) by the Adviser at any time without penalty, upon sixty (60)
days' written notice to the Company. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act), but
not including the assignment referenced in the first sentence of this section
and the Whereas clauses.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Portfolios, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed) after receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the portions of
such materials that expressly relate to the Sub-Adviser, its services and its
clients. The Adviser agrees to use its reasonable best efforts to ensure that
materials prepared by its employees or agents or its affiliates that refer to
the Sub-Adviser or its clients 'in any way are consistent with those materials
previously approved by the Sub-Adviser as referenced in the first sentence of
this paragraph. Sales literature may be furnished to the Sub-Adviser by
first-class or overnight mail, facsimile transmission equipment or hand
delivery.
9. No provisions 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 vote of the Majority of the outstanding voting securities of a Portfolio.
5
10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together. constitute only one instrument.
12. Should any part of this Agreement be held 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.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
To the Sub-Adviser at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
To the Company or a Portfolio at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM XXXXXX & ASSOCIATES, LTD. THE PBHG FUNDS, INC.
By: /s/ Xxxx X. Xxxxxxxxx By: /s/ Xxx X. Xxxxxxxx
Title: CFO Title: CFO
PILGRIM XXXXXX VALUE INVESTORS, INC.
By: /s/ Xxxx X. Xxxxxxx
Title: Director & President
7
SCHEDULE A
SUB-ADVISED PORTFOLIOS
The PBHG Funds, Inc. Fee
PBHG Large Cap Value Fund 0.40%
PBHG Mid-Cap Value Fund 0.50%
PBHG Strategic Small Company Fund 0.30%
PBHG Small Cap Value Fund 0.65%
PBHG Focused Value Fund 0.85%
8
INTERIM INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 21st day of September, by and among Pilgrim
Xxxxxx & Associates, Ltd. (the "Adviser"), Xxxxxx Xxxxxxxxx International
Limited, (the "Sub-Adviser") and The PBHG Funds, Inc., a Maryland corporation
(the "Company").
WHEREAS, the Company is a Maryland corporation and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company;
WHEREAS, pursuant to the Interim Investment Advisory Agreement dated
September 21, 2000 and Schedule A dated September 21, 2000 between the Adviser
and the Company, the Adviser will act as investment adviser to the PBHG
International Fund (the "Fund"), a separate portfolio of the Company;
WHEREAS, the Adviser and the Company each desire to retain the Sub-Adviser
to provide investment advisory services to the Company in connection with the
management of the Fund, and the Sub-Adviser is willing to render such investment
advisory services;
WHEREAS, United Asset Management, Inc., the parent of both the Sub-Adviser
and the Adviser, is about to be acquired by an affiliate of Old Mutual, plc in a
transaction that will result in an assignment as that term is defined in the
1940 Act;
WHEREAS, the Adviser's current investment advisory agreement and the
Sub-Adviser's current investment sub-advisory agreements (the "Prior Investment
Advisory Agreements") with the Company on behalf of the Fund will terminate upon
their "assignment" as that term is defined under the 1940 Act;
WHEREAS, the Adviser and the Sub-Advisers are willing to continue to
furnish such services to the Fund under this interim investment sub-advisory
agreements until a new investment advisory agreement and new investment
sub-advisory agreement are approved by the directors of the Company and the
shareholders of the Fund as required by Section 15 of the 1940 Act;
WHEREAS, the Company, the Adviser and the Sub-Advisers desire to comply
with the provisions of Rule 15a-4 including subsection (b) thereof under the
1940 Act; and
WHEREAS, the directors of the Company, including a majority of those
directors who are not interested persons of the Company, have found that the
scope and quality of services to
be provided to the Company under this Agreement will be at least equivalent to
the scope and quality of services provided under the Prior Investment Advisory
Agreements.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of the Fund
and the composition of the Fund's investment portfolios, including the purchase,
retention and disposition thereof, in accordance with the Fund's investment
objectives, policies and restrictions as stated in such Fund's Prospectus (such
Prospectus and Statement of Additional Information as currently in effect and as
amended or supplemented from time to time, being herein called the
"Prospectus"), and subject to the following understandings:
(1) The Sub-Adviser shall provide supervision of the Fund's investments and
determine from time to time what investments and securities will be purchased,
retained or sold by the Fund, and what portion of the assets that be invested or
held uninvested in cash.
(2) In the performance of its duties and obligations under this Agreement,
the Sub-Adviser shall act in conformity with the Company's Articles of
Incorporation and the Prospectus and with the instructions and directions of the
Adviser and of the Board of Directors and will conform and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, and
all other applicable federal and state laws and regulations, as each is amended
from time to time.
(3) The Sub-Adviser shall determine the securities to be purchased or sold
by the Fund and will place orders with or through such persons, brokers or
dealers to carry out the policy with respect to brokerage set forth in such
Fund's Registration Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in conformity with
federal securities laws. In providing the Fund with investment supervision, the
Sub-Adviser will give primary consideration to securing the most favorable price
and efficient execution. Within the framework of this policy, the Sub-Adviser
may consider the financial responsibility, research and investment information
and other services provided by brokers or dealers who may effect or be a party
to any such transaction or other transactions to which the Sub-Adviser's other
clients may be a party. It is understood that it is desirable for the Fund that
the Sub-Advisor have access to supplemental investment and market research and
security and economic analysis provided by brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Sub-Adviser is authorized to place orders
for the purchase and sale of securities for the Fund with brokers, subject to
review by the Company's Board of Directors from time to time with respect to the
extent and continuation of this practice. It is understood that the services
provided by such brokers may be useful to the Sub-Adviser in connection with the
Sub-Adviser's services to other clients.
2
On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of a Portfolio as well as other clients of the
Sub-Adviser, the Sub-Adviser, to the extent permitted by, applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the Fund in
question and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect to
the Fund's portfolio transactions required by subparagraphs (b)(5), (6), (7),
(9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Company's Board of Directors such periodic and special reports as
the Company's Board of Directors may reasonably request.
(5) The Sub-Adviser shall provide the Fund's ' Custodian on each business
day with information relating to all transactions concerning the Fund's assets
and shall provide the Adviser with such information upon request of the Adviser.
(6) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser shall be free
to render similar services to others, as long as such services do not impair the
services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's officers or employees.
It is understood that the Sub-Adviser may obtain certain administrative
services, including, without limitation, services relating to trade
reconciliation and the production of client reports, from its parent company in
carrying out its obligations under this Agreement.
(c) The Sub-Adviser shall keep the Fund's books and records required to be
maintained by the Sub-Adviser pursuant to paragraph 1(a) of this Agreement and
shall timely furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by the Adviser to keep the
other books and records of the Fund required by Rule 31a-1 under the 1940 Act.
The Sub-Adviser agrees that all records that it maintains on behalf of the Fund
are property of the Fund and the Sub-Adviser will surrender promptly to a Fund
any of such records upon that Fund's request; provided, however, that the
Sub-Adviser may retain a copy of such records. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such
records as are required to be maintained by it pursuant to paragraph 1(a) of
this Agreement.
3
2. The Adviser shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Advisory Agreement and shall oversee and
review the Sub-Adviser's performance of its duties under this Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation, as filed with the Secretary of State of
Maryland (such Articles of Incorporation as in effect on the date of this
Agreement, and as amended from time to time, are herein called the
"Articles of Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the date of
this Agreement, and as amended from time to time, are herein called the
"ByLaws");
(c) Certified resolutions of the Company's Board of Directors
authorizing the appointment of the Sub-Adviser and the Sub-Adviser and
approving the form of this Agreement;
(d) Registration Statements under the 1940 Act and the Securities Act
of 1933, as amended on Form N-1A (the "Registration Statement") as filed
with the Securities and Exchange Commission (the "Commission") relating to
the Fund and shares of the Fund's beneficial shares, and all amendments
thereto;
(e) Notification of Registration of the Company under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of the Company.
4. For the services to be provided by the Sub-Adviser pursuant to this Agreement
for the Portfolio, the Adviser will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate equal to 0.50% of the Portfolio's average daily
net assets. This fee will be paid to the Sub-Adviser from the Adviser's advisory
fee for such Portfolio. Such compensation will be held in interest-bearing
escrow accounts for each Portfolio with the Fund's custodian bank, if a majority
of a specific Portfolio's outstanding voting securities (as defined in the 0000
Xxx) approve a new contract with the Sub-Adviser by the end of the 150-day
period (commencing on the Assignment Date), the amount in the escrow account
(including interest earned) will be paid to the Adviser, and the Adviser will
pay to the Sub-Adviser the fee specified in Schedule A, upon the date of such
approval by each such Portfolio. If a majority of a Portfolio's outstanding
voting securities do not approve a contract with the Sub-Adviser by the end of
such 150 day period, the Sub-Adviser shall be paid, out of the escrow account,
the lessor of: (i) Any costs incurred in performing the interim contract (plus
interest earned on that amount while in escrow); or (ii) The total amount in the
escrow account (plus interest earned).
4
5. The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by a Portfolio or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or modified hereby.
6. This Agreement shall commence on the date on which the Prior Investment
Advisory Agreement is terminated by its assignment (the "Assignment Date") and
continue until, the sooner of the date: (i) With respect to a Portfolio, the
date when a new investment advisory agreement is approved by the directors and a
majority (as defined in the 0000 Xxx) of a Portfolio's outstanding voting
securities (as defined in the 1940 Act); or (ii) One hundred and fifty (150)
days from the Assignment Date. Once an individual Portfolio listed on Schedule A
hereto receives approval from a majority of the outstanding voting securities as
required by section (i) above, that individual Portfolio will be deemed to have
terminated this Agreement and be governed by the new investment advisory and
sub-advisory agreements. Notwithstanding the foregoing, this Agreement may be
terminated as to a Portfolio (a) at any time without penalty by the Company upon
the vote of a majority of the Directors or by vote of the majority of the
Portfolio's outstanding voting securities, upon ten (10) days' written notice to
the Adviser or (b) by the Adviser at any time without penalty, upon sixty (60)
days' written notice to the Company. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act), but
not including the assignment referenced in the first sentence of this section
and the Whereas clauses.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Fund, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed) after receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the portions of
such materials that expressly relate to the Sub-Adviser, its services and its
clients. The Adviser agrees to use its reasonable best efforts to ensure that
materials prepared by its employees or agents or its affiliates that refer to
the
5
Sub-Adviser or its clients 'in any way are consistent with those materials
previously approved by the Sub-Adviser as referenced in the first sentence of
this paragraph. Sales literature may be furnished to the Sub-Adviser by
first-class or overnight mail, facsimile transmission equipment or hand
delivery.
9. No provisions 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 vote of the Majority of the outstanding voting securities of a Portfolio.
10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together. constitute only one instrument.
12. Should any part of this Agreement be held 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.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
To the Sub-Adviser at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
To the Company or a Portfolio at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
6
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM XXXXXX & ASSOCIATES, LTD. THE PBHG FUNDS, INC.
By: /s/ Xxxx X. Xxxxxxxxx By: /s/ Xxx X. Xxxxxxxx
Title: CFO Title: CFO
XXXXXX XXXXXXXXX INTERNATIONAL LIMITED.
By: /s/ Xxxxxx Xxxxxxx
Title: Director
8
INTERIM INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 21st day of September, by and among Pilgrim
Xxxxxx & Associates, Ltd. (the "Adviser"), Wellington Management Company, LLP,
(the "Sub-Adviser") and The PBHG Funds, Inc., a Maryland corporation (the
"Company").
WHEREAS, the Company is a Maryland corporation and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company;
WHEREAS, pursuant to the Interim Investment Advisory Agreement dated
September 21, 2000 between the Adviser and the Company, the Adviser will act as
investment adviser to the PBHG Cash Reserves Fund (the "Fund"), a separate
portfolio of the Company;
WHEREAS, the Adviser and the Company each desire to retain the Sub-Adviser
to provide investment advisory services to the Company in connection with the
management of the Fund, and the Sub-Adviser is willing to render such investment
advisory services;
WHEREAS, United Asset Management, Inc., the parent of the Adviser, is about
to be acquired by an affiliate of Old Mutual, plc in a transaction that will
result in an assignment as that term is defined in the 1940 Act;
WHEREAS, the Adviser's current investment advisory agreement and the
Sub-Adviser's current investment sub-advisory agreements (the "Prior Investment
Advisory Agreements") with the Company on behalf of the Fund will terminate upon
their "assignment" as that term is defined under the 1940 Act;
WHEREAS, the Adviser and the Sub-Advisers are willing to continue to
furnish such services to the Fund under this interim investment sub-advisory
agreements until a new investment advisory agreement and new investment
sub-advisory agreement are approved by the directors of the Company and the
shareholders of the Fund as required by Section 15 of the 1940 Act;
WHEREAS, the Company, the Adviser and the Sub-Advisers desire to comply
with the provisions of Rule 15a-4 including subsection (b) thereof under the
1940 Act; and
WHEREAS, the directors of the Company, including a majority of those
directors who are not interested persons of the Company, have found that the
scope and quality of services to be provided to the Company under this Agreement
will be at least equivalent to the scope and quality of services provided under
the Prior Investment Advisory Agreements.
1
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of the Fund
and the composition of the Fund's investment portfolios, including the purchase,
retention and disposition thereof, in accordance with the Fund's investment
objectives, policies and restrictions as stated in such Fund's Prospectus (such
Prospectus and Statement of Additional Information as currently in effect and as
amended or supplemented from time to time, being herein called the
"Prospectus"), and subject to the following understandings:
(1) The Sub-Adviser shall provide supervision of the Fund's investments and
determine from time to time what investments and securities will be purchased,
retained or sold by the Fund, and what portion of the assets that be invested or
held uninvested in cash.
(2) In the performance of its duties and obligations under this Agreement,
the Sub-Adviser shall act in conformity with the Company's Articles of
Incorporation and the Prospectus and with the instructions and directions of the
Adviser and of the Board of Directors and will conform and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, and
all other applicable federal and state laws and regulations, as each is amended
from time to time.
(3) The Sub-Adviser shall determine the securities to be purchased or sold
by the Fund and will place orders with or through such persons, brokers or
dealers to carry out the policy with respect to brokerage set forth in such
Fund's Registration Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in conformity with
federal securities laws. In providing the Fund with investment supervision, the
Sub-Adviser will give primary consideration to securing the most favorable price
and efficient execution. Within the framework of this policy, the Sub-Adviser
may consider the financial responsibility, research and investment information
and other services provided by brokers or dealers who may effect or be a party
to any such transaction or other transactions to which the Sub-Adviser's other
clients may be a party. It is understood that it is desirable for the Fund that
the Sub-Advisor have access to supplemental investment and market research and
security and economic analysis provided by brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Sub-Adviser is authorized to place orders
for the purchase and sale of securities for the Fund with brokers, subject to
review by the Company's Board of Directors from time to time with respect to the
extent and continuation of this practice. It is understood that the services
provided by such brokers may be useful to the Sub-Adviser in connection with the
Sub-Adviser's services to other clients.
2
On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients of the
Sub-Adviser, the Sub-Adviser, to the extent permitted by, applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the Fund in
question and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect to
the Fund's portfolio transactions required by subparagraphs (b)(5), (6), (7),
(9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and shall
render to the Company's Board of Directors such periodic and special reports as
the Company's Board of Directors may reasonably request.
(5) The Sub-Adviser shall provide the Fund's Custodian on each business day
with information relating to all transactions concerning the Fund's assets and
shall provide the Adviser with such information upon request of the Adviser.
(6) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser shall be free
to render similar services to others, as long as such services do not impair the
services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's officers or employees.
(c) The Sub-Adviser shall keep the Fund's books and records required to be
maintained by the Sub-Adviser pursuant to paragraph 1(a) of this Agreement and
shall timely furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by the Adviser to keep the
other books and records of the Fund required by Rule 31a-1 under the 1940 Act.
The Sub-Adviser agrees that all records that it maintains on behalf of the Fund
are property of the Fund and the Sub-Adviser will surrender promptly to a Fund
any of such records upon that Fund's request; provided, however, that the
Sub-Adviser may retain a copy of such records. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such
records as are required to be maintained by it pursuant to paragraph 1(a) of
this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Interim Investment Advisory Agreement and
shall oversee and review the Sub-Adviser's performance of its duties under this
Agreement.
3
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation of the Company, as filed with the
Secretary of State of Maryland (such Articles of Incorporation as in effect
on the date of this Agreement, and as amended from time to time, are herein
called the "Articles of Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the date of
this Agreement, and as amended from time to time, are herein called the
"ByLaws");
(c) Certified resolutions of the Company's Board of Directors
authorizing the appointment of the Adviser and the Sub-Adviser with respect
to the Fund, and approving the form of this Agreement;
(d) Registration Statements under the 1940 Act and the Securities Act
of 1933, as amended on Form N-1A (the "Registration Statement") as filed
with the Securities and Exchange Commission (the "Commission") relating to
the Fund and shares of the Fund's beneficial shares, and all amendments
thereto;
(e) Notification of Registration of the Company under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of the Company.
4. For the services to be provided by the Sub-Adviser pursuant to this Agreement
for the Fund, the Adviser will pay to the Sub-Adviser as full compensation
therefore a fee at an annual rate equal to 0.075% of the Fund's average daily
net assets up to and including $500 million and 0.020% of the Fund's average
daily net assets over $500 million, but subject to a minimum annual fee of
$50,000. This fee will be paid to the Sub-Adviser by the Adviser. Such
compensation will be held in an interest-bearing escrow account for the Fund
with the Fund's custodian bank. If a majority of the Fund's outstanding voting
securities (as defined in the 0000 Xxx) approve a new investment sub-advisory
contract with the Sub-Adviser by the end of the 150-day period (commencing on
the Assignment Date), the amount in the escrow account (including interest
earned) will be paid to the Sub-Adviser. If a majority of the Fund's outstanding
voting securities do not approve a new investment sub-advisory contract with the
Sub-Adviser by the end of such 150 day period, the Sub-Adviser shall be paid,
out of the escrow account, the lesser of: (i) Any costs incurred in performing
the interim contract (plus interest earned on that amount while in escrow); or
(ii) The total amount in the escrow account (plus interest earned).
5. The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by the Fund or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the
4
period and the amount set forth in Section 36(b)(3) of the 1940 Act), or a loss
resulting from willful misfeasance, bad faith or gross negligence on the
Sub-Adviser's part in the performance of its duties or from reckless disregard
of its obligations and duties under this Agreement, except as may otherwise be
provided under provisions of applicable state law which cannot be waived or
modified hereby.
6. This Agreement shall commence on the date on which the Prior Investment
Advisory Agreement is terminated by its assignment (the "Assignment Date") and
continue until, the sooner of the date: (i) With respect to the Fund, the date
when new investment advisory and sub-advisory agreements are approved by the
directors and a majority (as defined in the 0000 Xxx) of the Fund's outstanding
voting securities (as defined in the 1940 Act); or (ii) One hundred and fifty
(150) days from the Assignment Date. Once the Fund receives approval from a
majority of the outstanding voting securities as required by section (i) above,
the Fund will be deemed to have terminated this Agreement and be governed by the
new investment advisory and sub-advisory agreements. Notwithstanding the
foregoing, this Agreement may be terminated as to the Fund (a) at any time
without penalty by the Company upon the vote of a majority of the Directors or
by vote of the majority of the Fund's outstanding voting securities, upon ten
(10) days' written notice to the other parties; (b) by the Adviser at any time
without penalty, upon sixty (60) days' written notice to the other parties; or
(c) by the Sub-Adviser at any time, without the payment of any penalty, on 90
days' written notice to the other parties. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act), but
not including the assignment referenced in the first sentence of this section
and the Whereas clauses.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Fund, the Company or the public that refer to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed) after receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the portions of
such materials that expressly relate to the Sub-Adviser, its services and its
clients. The Adviser agrees to use its reasonable best efforts to ensure that
materials prepared by its employees or agents or its affiliates that refer to
the Sub-Adviser or its clients in any way are consistent with those materials
previously approved by the Sub-Adviser as referenced in the first sentence of
this paragraph. Sales literature may be furnished to the Sub-Adviser by
first-class or overnight mail, facsimile transmission equipment or hand
delivery.
5
9. No provisions 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 vote of the majority of the outstanding voting securities of the Fund.
10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together constitute only one instrument.
12. Should any part of this Agreement be held 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.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
To the Sub-Adviser at:
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Regulatory Affairs
To the Company or the Fund at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or
6
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM XXXXXX & ASSOCIATES, LTD. THE PBHG FUNDS, INC.
By: /s/ Xxxx X. Xxxxxxxxx By: /s/ Xxx X. Xxxxxxxx
Title: CFO Title: CFO
WELLINGTON MANAGEMENT COMPANY, LLP.
By: /s/ Xxxxxx X. XxXxxxxxx
Title: President & CEO
8
ESCROW AGREEMENT
This ESCROW AGREEMENT dated this 21st day of September, 2000, is by and
among THE PBHG FUNDS, INC., a Maryland corporation (the "Company"), PILGRIM
XXXXXX & ASSOCIATES, LTD., a Delaware corporation (the "Adviser"), and FIRST
UNION NATIONAL BANK (the "Escrow Agent").
RECITALS:
WHEREAS, pursuant to an Interim Investment Advisory Agreement, dated the
date hereof, among the Company and the Adviser (the "Interim Agreement"), the
Adviser has been appointed by the Company to provide investment advice pursuant
to the terms of the Interim Agreement. Except as provided herein, capitalized
terms used but not defined herein have the meanings given to such terms in the
Interim Agreement; and
WHEREAS, in accordance with Section 5 of the Interim Agreement,
compensation for the Adviser's services will be deposited in an interest-bearing
escrow account at the end of each month by each of the series of the Company
(each a "Portfolio"); and
WHEREAS, Company, Adviser and the Escrow Agent now wish to provide for the
appointment of an escrow agent to hold the escrowed funds, and to set forth the
terms and conditions under which the funds held in escrow shall be disbursed;
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Appointment of Escrow Agent. The Company, on behalf of itself and each
of its separate Portfolios, and the Adviser hereby appoint the Escrow Agent as
the escrow agent under this Escrow Agreement and the Escrow Agent hereby accepts
such appointment and agrees to hold and deposit all of the funds deposited into
escrow with it pursuant to the Interim Agreement in accordance with the terms
hereof, and to perform its other duties hereunder.
2. Establishment of Escrow Funds. The Company, on behalf of each Portfolio,
will deliver, as provided in Section 5 of the Interim Agreement, the Adviser's
compensation to the Escrow Agent. The Escrow Agent will maintain a separate
escrow account for each Portfolio (including such sub-accounts as may be
necessary for compensation payable
1
by the Adviser to any investment sub-advisers (the "Sub-Advisers") for specific
Portfolios). Upon receipt of a deposit from the Company on behalf of a
Portfolio, the Escrow Agent shall provide written confirmation to the Company
and the Adviser that such sum has been deposited with it. The Adviser's
compensation for a Portfolio held in escrow by the Escrow Agent hereunder,
together with all interest thereon, herein is referred to as an "Escrow Fund,"
and collectively as "Escrow Funds."
3. Duty to Invest Escrow Funds. All Escrow Funds must be invested into
overnight repurchase agreements meeting the requirements of SEC Rule 2a-7, or in
other money market instruments as agreed to in writing by all of the parties.
4. Income on an Escrow Fund. All income earned on an Escrow Fund shall be
added to the Escrow Fund and distributed in accordance with the terms hereof.
5. Delivery of Escrow Fund by Escrow Agent.
(a) If a majority of a Portfolio's outstanding voting securities
approve a New Investment Advisory Agreement and/or a New Investment
Sub-Advisory Agreement with the Adviser and/or the respective Sub-Adviser
within 150 days after the Assignment Date, the amount in the escrow account
(including interest earned) which has been deposited by the Company on
behalf of said Portfolio will be paid to the Adviser upon the date of such
approval by said Portfolio.
(b) If a majority of a Portfolio's outstanding voting securities do
not approve a contract with the Adviser and/or the respective Sub-Adviser,
the Adviser will be paid, out of the escrow account, the lessor of: (i) any
costs incurred by the Adviser and/or respective Sub-Adviser in performing
the services under the Interim Agreement (plus interest earned on that
amount while in escrow); or (ii) the total amount in the escrow account
(plus interest earned). The Company shall be reimbursed the remainder
amount.
(c) The Escrow Agent shall release the Escrowed Funds as instructed by
a writing signed by both the Company and the Adviser which instruction
certified that an event in either (a) or (b) of this section has occurred,
and if (b) shall have occurred, such instruction shall certify the amounts
to be paid under such subsection (b).
2
6. Suspension of Performance; Disbursement Into Court. If, at any time,
there shall exist any dispute between the Company and the Adviser with respect
to the holding or disposition of any portion of the Escrow Funds or any other
obligations of Escrow Agent hereunder, or if at any time the Escrow Agent is
unable to determine, to the Escrow Agent's sole satisfaction, the proper
disposition of any portion of the Escrow Funds or the Escrow Agent's proper
actions with respect to its obligations hereunder, or if a successor Escrow
Agent has not been appointed within 30 days of the furnishing by the Escrow
Agent of a notice of resignation pursuant to Section 7 hereof, then Escrow Agent
may, in its sole discretion, take either or both of the following actions:
(a) suspend the performance of any of its obligations (including
without limitation any disbursement obligations) under this Escrow
Agreement until such dispute or uncertainty shall be resolved to the sole
satisfaction of Escrow Agent or until a successor Escrow Agent shall have
been appointed (as the case may be); provided however, that Escrow Agent
shall continue to invest the Escrow Funds in accordance with Section 3
hereof; and/or
(b) petition (by means of an interpleader action or any other
appropriate method) any court of competent jurisdiction for instructions
with respect to such dispute or uncertainty, and to the extent required by
law, pay into such court, for holding and disposition in accordance with
the instructions of such court, all funds held by it in the Escrow Funds,
after deduction and payment to Escrow Agent of all fees and expenses
(including court costs and attorneys' fees) payable to, incurred by, or
expected to be incurred by Escrow Agent in connection with the performance
of its duties and the exercise of its rights hereunder.
The Escrow Agent shall have no liability to the Company, the Adviser, their
respective shareholders or any other person with respect to any such suspension
of performance or disbursement into court, specifically including any liability
or claimed liability that may arise, or be alleged to have arisen, out of or as
a result of any delay in the disbursement of funds held in the Escrow Funds or
any delay in or with respect to any other action required or requested of Escrow
Agent.
3
7. Resignation and Removal of Escrow Agent. The Escrow Agent may resign
from the performance of its duties hereunder at any time by giving ten (10)
days' prior written notice to the Company and the Adviser, or may be removed,
with or without cause, by the Company and the Adviser acting jointly by
furnishing written notice to the Escrow Agent, at any time by the giving of ten
(10) days' prior written notice to the Escrow Agent. Such resignation or removal
shall take effect upon the appointment of a successor Escrow Agent as provided
herein. Upon any such notice of resignation or removal, the Company and the
Adviser jointly shall appoint a successor Escrow Agent hereunder, which shall be
a bank. Upon the acceptance in writing of any appointment as Escrow Agent
hereunder by a successor Escrow Agent, such successor Escrow Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be
discharged from its duties and obligations under this Escrow Agreement, but
shall not be discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow Agent's
resignation or removal, the provisions of this Escrow Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Escrow Agent under this Escrow Agreement. The retiring Escrow Agent shall
transmit all records pertaining to the Escrow Funds and shall pay all funds held
by it in the Escrow Funds to the successor Escrow Agent, after making copies of
such records as the retiring Escrow Agent deems advisable and after deduction
and payment to the retiring Escrow Agent of all fees and expenses (including
court costs and attorneys' fees) payable to, incurred by, or expected to be
incurred by the retiring Escrow Agent in connection with the performance of its
duties and the exercise of its rights hereunder.
8. Liability of Escrow Agent.
(a) The duties of the Escrow Agent hereunder are entirely
administrative and not discretionary. The duties and responsibilities of
the Escrow Agent hereunder shall be determined solely by the express
provisions of this Escrow Agreement. The Escrow Agent undertakes to perform
only such duties as are expressly set forth herein and no further duties or
responsibilities shall be implied. The Escrow Agent is obligated to act
only in accordance with written instructions received by it as provided in
this Escrow Agreement, is authorized hereby to comply with any orders,
judgments or decrees of any court or arbitration panel and shall not incur
any liability as a result of its compliance with such instructions, orders,
judgments or decrees.
(b) The Escrow Agent may rely and shall be protected in acting upon
any instrument, not only as to its due execution, validity and
effectiveness, but also as to the truth and accuracy of any information
contained therein, which the Escrow Agent shall in good faith believe to be
genuine, to have been signed or presented by the persons or parties
purporting to sign the same and to conform to the provisions of this Escrow
Agreement. The Escrow Agent shall be under no duty to inquire into or
investigate the validity, accuracy or content of any such instrument.
4
(c) The Company and the Adviser hereby waive any suit, claim, demand
or cause of action of any kind which either one or both may now or
hereafter have to assert against the Escrow Agent arising out of or
relating to the execution or performance by the Escrow Agent of this Escrow
Agreement, unless such suit, claim, demand or cause of action is based upon
the willful misappropriation of funds by the Escrow Agent or unless a court
of competent jurisdiction determines that the Escrow Agent's gross
negligence was the primary cause of a loss to the Company or the Adviser.
(d) The Escrow Agent shall have no duty to solicit any payments that
may be due to it hereunder. The Escrow Agent shall not incur any liability
for following the instructions herein contained or expressly provided for
or written instructions given by the Company and the Adviser. In the
administration of this Escrow Agreement and the Escrow Fund hereunder, the
Escrow Agent may execute any of its powers and perform its duties hereunder
directly or through agents or attorneys and may consult with counsel,
accountants and other skilled persons to be selected and retained by it.
The Escrow Agent shall not be liable for anything done, suffered or omitted
in good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons.
9. Indemnification of Escrow Agent. The Company and the Adviser, jointly
and severally, hereby indemnify and hold harmless the Escrow Agent and each
director, officer, employee, attorney, agent and affiliate of the Escrow Agent
(the "Indemnitees") against any and all actions, claims, losses, damages,
liabilities, fines, penalties, costs and expenses of any kind or nature
whatsoever (including, without limitation, reasonable attorneys' fees, costs and
expenses and the reasonable allocated costs and expenses of in-house counsel)
("Losses") incurred by or asserted against any of them from and after the date
hereof, whether direct, indirect or consequential, as a result of or arising
from or in any way relating to any claim, demand, suit, action, proceeding or
investigation by any person, including without limitation the Company or the
Adviser, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any person under any statute or regulation, or common
law or equitable cause or otherwise arising from or in connection with the
negotiation, preparation, execution, performance or failure of performance of
this Escrow Agreement or any transaction contemplated herein; except for any
such Losses arising from any liability resulting solely from the gross
negligence or willful misconduct of the party claiming indemnification or from a
breach of this Escrow Agreement by the Escrow Agent. In addition to and not in
limitation of the immediately preceding sentence, the Company and the Adviser,
jointly and severally, also hereby indemnify and hold harmless the Indemnitees
and each of them from and against any and all Losses that may be imposed on,
incurred by, or asserted against the Indemnitees or any of them for following
any instruction or other direction upon which the Escrow Agent is authorized to
rely pursuant to the terms of this Escrow Agreement. The provisions of this
Section 9 shall survive the termination of this Escrow Agreement and the
resignation or removal of the Escrow Agent for any reason. Anything in this
Escrow Agreement to the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or consequential loss or damage of any
kind
5
whatsoever (including but not limited to lost profits), even if the Escrow Agent
has been advised of such loss or damage and regardless of the form of action.
10. Fees and Expenses of Escrow Agent. The Company and the Adviser shall
compensate the Escrow Agent for its services hereunder in accordance with
Schedule A attached hereto and, in addition, shall reimburse the Escrow Agent
for all of its reasonable out-of-pocket expenses, including attorneys' fees,
travel expenses, telephone and facsimile transmission costs, postage (including
express mail and overnight delivery charges), copying charges and the like. All
of the compensation and reimbursement obligations set forth in this section
shall be payable by the Company and the Adviser, jointly and severally, upon
demand by the Escrow Agent. The obligations of the Company and the Adviser under
this section shall survive any termination of this Escrow Agreement and the
resignation or removal of the Escrow Agent.
The Escrow Agent is authorized to, and may, disburse to itself from the
Escrow Funds, from time to time, the amount of any compensation and
reimbursement of out-of-pocket expenses due and payable hereunder (including any
amount to which the Escrow Agent or the Indemnitees are entitled to seek
indemnification pursuant to Section 9 hereof.) The Escrow Agent shall notify the
Company and the Adviser of any disbursement from the Escrow Funds to itself or
the Indemnitees in respect of any compensation or reimbursement hereunder and
shall furnish to the Company and the Adviser copies of all related invoices and
other statements. The Company and the Adviser hereby grant to the Escrow Agent
and the Indemnitees a security interest in and lien upon the Escrow Funds and
all funds therein to secure all obligations hereunder to the Escrow Agent and
the Indemnitees, and the Escrow Agent and the Indemnities shall have the right
to offset the amount of any compensation or reimbursement due any of them
hereunder (including any claim for indemnification pursuant to Section 9 hereof)
against the Escrow Funds. If for any reason funds in the Escrow Funds are
insufficient to cover such compensation and reimbursement, the Company and the
Adviser shall promptly pay such amounts to the Escrow Agent or the Indemnitees
upon receipt of an itemized invoice.
11. Notices. Any notice required or permitted hereunder shall be in writing
and shall be deemed duly given if (and then two business days after) it is sent
by registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
(a) If to Company:
The PBHG Funds, Inc.
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
Attn: Xxx Xxxxxxxx
Facsimile: (000) 000-0000
With a copy to:
6
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to Adviser:
Pilgrim Xxxxxx & Associates, Ltd.
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(c) If to the Escrow Agent:
First Union National Bank, as Escrow Agent
000 Xxxxx Xxxxx Xxxxxx, XX-0000
Corporate Trust Administration, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: _______________
Facsimile: (000) 000-0000
With a copy to:
the Adviser, at the addresses set forth above, if
the notice is from the Company
or
the Company, at the address set forth above, if the
notice is from the Adviser
7
Any party may send any notice required or permitted hereunder to the intended
recipient at the address set forth above using any other means of communication
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail or electronic mail), but no such notice shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices required or
permitted hereunder are to be delivered by giving the other parties notice in
the manner herein set forth.
12. Miscellaneous. This Escrow Agreement and the Interim Agreement set
forth the entire understanding of the parties with respect to the subject matter
hereof. All of the terms and provisions of this Escrow Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto.
13. Governing Law. This Escrow Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Pennsylvania or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Pennsylvania.
14. Consent to Jurisdiction and Venue. In the event that any party hereto
commences a lawsuit or other proceeding relating to or arising from this
Agreement, the parties hereto agree that the United States District Court for
the Commonwealth of Pennsylvania shall have the sole and exclusive jurisdiction
over any such proceeding. If all such courts lack federal subject matter
jurisdiction, the parties agree that the Superior Court Division of the General
Court of the Commonwealth of Pennsylvania shall have sole and exclusive
jurisdiction. Any of these courts shall be proper venue for any such lawsuit or
judicial proceeding and the parties hereto waive any objection to such venue.
The parties hereto consent to and agree to submit to the jurisdiction of any of
the courts specified herein and agree to accept service or process to vest
personal jurisdiction over them in any of these courts.
15. Amendments. No amendment to any provision of this Escrow Agreement
shall be valid unless it is in writing and signed by the Company, the Adviser
and the Escrow Agent.
16. Counterparts. This Escrow Agreement may be signed in counterparts, each
of which shall be an original and all of which shall constitute one instrument.
17. Termination. Upon the first to occur of the disbursement of all amounts
in the Escrow Funds pursuant to Section 5, or the disbursements of all amounts
in the Escrow Funds into court pursuant to Section 6 hereof, this Escrow
Agreement shall terminate and the Escrow Agent shall have no further obligation
or liability whatsoever with respect to this Escrow Agreement or the Escrow
funds.
8
18. Dealings. The Escrow Agent and any stockholder, director, officer or
employee of the Escrow Agent may buy, sell, and deal in any of the securities of
the Company or the Adviser and become pecuniarily interested in any transaction
in which the Company or the Adviser may be interested, and contract and lend
money to the Company or the Adviser and otherwise act as fully and freely as
though it were not Escrow Agent under this Agreement. Nothing herein shall
preclude the Escrow Agent from acting in any other capacity for the Company or
the Adviser or for any other entity.
[Remainder of this page intentionally left blank]
9
IN WITNESS WHEREOF, this Escrow Agreement has been executed as of the date
and year first above written.
THE PBHG FUNDS, INC.
By: /s/ Xxx X. Xxxxxxxx
Name: Xxx X. Xxxxxxxx
Title: CFO
PILGRIM XXXXXX & ASSOCIATES, LTD.
By: /s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: CFO
FIRST UNION NATIONAL BANK
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Vice President
10
SCHEDULE A
Fees Payable to Escrow Agent
11
