EXHIBIT (d)
INVESTMENT SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT, dated February 25, 1997, between The
Westwood Funds on behalf of the Westwood Realty Fund, and the Westwood SmallCap
Equity Fund (the "Trust" and the "Funds", respectively), a Massachusetts
business trust, for purposes of Section 5 only, and Teton Advisers, LLC (the
"Adviser"), a Texas limited liability company and Westwood Management Corp. (the
"Sub-Adviser").
Whereas the Adviser has been appointed investment adviser to the Trust
and pursuant to such appointment desires to appoint the Sub-Adviser as its
sub-adviser; and whereas the Sub-Adviser desires to be so appointed;
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
The Sub-Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Trust with respect to the investment of the assets of
the Trust allocated to the Funds and to supervise and arrange the purchase and
sale of assets held in the investment portfolios of the Funds.
2. Duties and obligations of the Sub-Adviser with respect to
investments of assets of the Funds
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Trust's Advisers, the Sub-Adviser
shall (i) act as investment adviser for and supervise and manage the investment
and reinvestment of each Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Funds
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Funds and (ii) arrange for
the purchase and sale of securities and other assets held in the investment
portfolio of each Fund.
(b) The specific services to be provided or arranged for by
the Sub-Adviser for the Funds are to supervise the calculation of the net asset
value of each Fund's shares.
(c) In the performance of its duties under this Agreement, the
Sub-Adviser shall at all times use all reasonable efforts to conform to, and act
in accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940, as amended (the "Act"), and of any rules or
regulations in force thereunder; (ii) any other applicable provision of law;
(iii) the provisions of the Articles of Incorporation and By-Laws of the Trust,
as such documents are amended from time to time; (iv) the investment objective,
policies and restrictions applicable to the Funds as set forth in the Trust's
Registration Statement on Form N-1A and (v) any policies and determinations of
the Board of Trustees of the Trust with respect to the Funds.
(d) The Sub-Adviser will seek to provide qualified personnel
to fulfill its duties hereunder and will bear all costs and expenses (including
any overhead and personnel costs) incurred in connection with its duties
hereunder and shall bear the costs of any salaries or trustees fees of any
officers or Trustees of the Trust who are affiliated persons (as defined in the
Act) of the Sub-Adviser. If in any fiscal year, any Fund's aggregate expenses
(excluding interest, taxes, distribution expenses, brokerage commissions and
extraordinary expenses) exceed the most restrictive expense limitation imposed
by the securities law of any state in which the shares of that Fund are
registered or qualified for sale, the Sub-Adviser will reimburse the Trust for
the amount of such excess up to the amount of fees accrued for such fiscal year
hereunder. The amount of such reimbursement shall be calculated monthly and an
appropriate amount shall be held back or released to the Adviser each month so
that the aggregate amount held back at any particular time shall equal the net
amount of the reimbursement on a cumulative year-to-date basis. As of the end of
the year, the final amount of the total reimbursement shall be calculated and
the appropriate amount released to the Funds or the Sub-Adviser or paid to the
Funds by the Sub-Adviser.
(e) The Sub-Adviser shall give the Funds the benefit of its
best judgement and effort in rendering services hereunder, but neither the
Sub-Adviser nor any of its officers, trustees, employees, agents or controlling
persons shall be liable for any act or omission or for any loss sustained by the
Funds in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Trust may have
which may not be waived under applicable law.
(f) Nothing in this Agreement shall prevent the Sub-Adviser or
any trustee, officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Sub-Adviser or any of its trustees, officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting, provided that, for the
term of this Agreement, the Sub-Adviser will not act as investment adviser to
any investment companies other than the Trust.
3. Portfolio Transactions
In the course of the Sub-Adviser's execution of portfolio transactions
for the Funds, it is agreed that the Sub-Adviser shall employ securities brokers
and dealers which, in its judgement, will be able to satisfy the policy of the
Funds to seek the best execution of its portfolio transactions at reasonable
expenses. For purposes of this agreement, "best execution" shall mean prompt,
efficient and reliable execution at the most favorable price obtainable. Under
such conditions as may be specified by the Trust's Board of Trustees in the
interest of its shareholders and to ensure compliance with applicable law and
regulations, the Sub-Adviser may (a) place orders for the purchase or sale of
each Fund's portfolio with the Adviser's affiliate, Gabelli & Company, Inc. or
its affiliates, Southwest Securities Inc. or their affiliated entities pursuant
to procedures under 17e-1; (b) pay commissions to brokers other than its
affiliates which are higher than might be charged by another qualified broker to
obtain brokerage and/or research services considered by the Sub-Adviser to be
useful or desirable in the performance of its duties hereunder and for the
investment management of other advisory accounts over which it or its affiliates
exercise investment discretion; and (c) consider sales by brokers (other than
its affiliated distributor) of shares of the Funds and any other mutual fund for
which it or its affiliates act as investment adviser, as a factor in its
selection of brokers and dealers for each Fund's portfolio transactions.
4. Compensation of the Sub-Adviser
(a) The Adviser agrees to pay to the Sub-Adviser out of its
advisory fees with respect to the Funds, which advisory fees may be paid to the
Sub-Adviser directly by the Trust at the Adviser's request, and the Sub-Adviser
agrees to accept as full compensation for all services rendered by or through
the Sub-Adviser, a fee computed daily and payable monthly in an amount equal on
an annualized basis to the greater of (i) $150,000 per year on an aggregate
basis for all the Funds or (ii) 35% of the net revenues to the Advisers from the
Funds; net revenues are gross revenues less administrative and marketing fees at
an annual rate of .20% of each Fund's average net assets; gross revenues equal
to all advisory and administrative fees paid to the Adviser. For any period of
less than a month during which this Agreement is in effect, the fee shall be
prorated according to the proportion which such period bears to a full month of
28, 29, 30, or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of the Fund
shall be calculated pursuant to the procedures adopted by resolutions of the
Trustees of the Trust for calculating the net asset value of each Fund's shares.
5. Indemnity
(a) The Trust hereby agrees to indemnify the Sub-Adviser and
each of the Sub-Adviser's sub-advisers, trustees, officers, employees, and
agents (including any individual who serves at the Adviser's request as trustee,
officer, partner, trustee or the like of another corporation) and controlling
persons of each of them (each such person being an "indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgements,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable corporate law) reasonably incurred by such indemnitee
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which he may be or may have been threatened, while acting
in any capacity set forth above in this paragraph or thereafter by reason of his
having acted in any such capacity, except with respect to any matter as to which
he shall have been adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust and furthermore, in
the case of any criminal proceeding, so long as he had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence, (iv) reckless disregard of
the duties involved in the conduct of his position (the conduct referred to in
such clauses (i) through (v) being sometimes referred to herein as "disabling
conduct"), (2) as to any matter disposed of by settlement or a compromise
payment by such indemnitee, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such indemnitee
appears to have acted in good faith in the reasonable belief that his action was
in the best interest of the Trust and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff indemnification shall be
mandatory only if the prosecution of such action, suit or other proceeding by
such indemnitee was authorized by a majority of the full Board of the Trust.
Notwithstanding the foregoing, the Trust shall not be obligated to provide any
such indemnification to the extent such provision would waive any right which
the Trust cannot lawfully waive. The Sub-Adviser and Adviser shall each
indemnify the other and their respective officers, trustees, shareholders,
partners and controlling persons to the extent such persons are not indemnified
by the Trust and have not engaged in disabling conduct with respect to all
actions or omissions to act or any matter related to the activities of the such
persons hereunder.
(b) The Trust shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Trust receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that he is entitled to such indemnification
and if the Trustees of the Trustee determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Trust shall be insured against losses arising by reason of
any lawful advances, or (C) a majority of a quorum of Trustees of the Trust who
are "interested persons" of the Trust (as defined in Section 2(a)(19) of the
Act) nor parties to the proceeding ("Disinterested Non-Party Trustees") or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is not
liable by reason of disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum so directs, independent legal counsel in a
written opinion.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
6. Duration and Termination
This Agreement shall become effective upon the date hereof and
shall continue in effect for a period of two years and thereafter from year to
year, but only so long as such continuation is specifically approved at least
annually in accordance with the requirements of the Act.
This Agreement may be terminated by the Sub-Adviser at any
time without penalty upon giving the Trust sixty days' written notice (which
notice may be waived by the Trust) and may be terminated by the Trust at any
time without penalty upon giving the Sub-Adviser sixty days' notice (which
notice may be waived by the Adviser), provided that such termination by the
Trust shall be directed or approved by the vote of a majority of the Trustees of
the Trust in office at the time or by the vote of the holders of a "majority of
voting securities" (as defined in the Act) of the Funds at the time outstanding
and entitled to vote. This Agreement shall terminate automatically in the event
of its assignment (as "assignment" is defined in the Act and the rules
thereunder).
7. Notices
Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws
of the State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
9. Miscellaneous
The Declaration of Trust has been filed with the Secretary of
State of the Commonwealth of Massachusetts. The obligations of the Trust are not
personally binding upon, nor shall resort be had to the private property of, any
of the Trustees, shareholders, officers, employees or agents of the Trust, but
only the Trust's property shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
THE WESTWOOD FUNDS
By: /s/ Xxxxx XxXxx
Name: Xxxxx XxXxx
Title: Secretary
TETON ADVISERS, LLC
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Vice President and Treasurer
