SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of September, 2002, by and between
Evergreen Investment Management Company, LLC, a Delaware corporation (the
"Advisor"), and Xxxxxxx Capital Management, LLC, a Delaware limited liability
company ("the Subadvisor").
WHEREAS, the Advisor serves as investment adviser of the Evergreen
Masters Fund ("Fund"), a series of Evergreen Equity Trust ("the Trust"), a
Delaware business trust which has filed a registration statement under the
Investment Company Act of 1940, as amended ("xxx 0000 Xxx") and the Securities
Act of 1933 ("the Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Fund; and
WHEREAS, the Advisor desires to avail itself of the services, advice
and assistance of the Subadvisor to assist the Advisor in providing investment
advisory services to the Fund; and
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended ("the Advisers Act"), is engaged in the business of rendering
investment advisory services to investment companies and other institutional
clients and desires to provide such services to the Advisor;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follow:
1. Employment of the Subadvisor. The Advisor hereby employs the
Subadvisor to manage the investment and reinvestment of that portion of the Fund
which the Advisor allocates to the Subadvisor from time to time ("the Account"),
subject to the control and direction of the Trust's Board of Trustees, for the
period and on the terms hereinafter set forth. The Subadvisor hereby accepts
such employment and agrees during such period to render the services and to
assume the obligations herein set forth for the compensation herein provided.
The Subadvisor shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or represent the Advisor, the Fund
or the Trust in any way. The Subadvisor may execute account documentation,
agreements, contracts and other documents requested by brokers, dealers,
counterparties and other persons in connection with its management of the
Account.
2. Rebalancing of the Fund. The Advisor intends to allocate
approximately 25% of the existing net assets of the Fund for management by the
Subadvisor. In addition to the Subadvisor, the Advisor intends to appoint or has
appointed two other sub-advisers to assist in the management of the Fund's
assets along with the Advisor, and intends to allocate to each sub-adviser
(including the Advisor) 25% of all Fund new share purchases, purchase exchanges,
and distribution reinvestment less share redemptions, redemption exchanges and
cash distributions ("Net Flows"). The Advisor and the Subadvisor acknowledge
that market action may result in each sub-adviser managing more or less than 25%
of the Fund's assets at any point in time. The Advisor agrees that it will not
actively reallocate Fund assets among the sub-advisers unless average daily net
assets allocated to one sub-adviser (i) exceeds 35% or (ii) is less than 15%, in
each case of average daily net assets of the Fund for three consecutive calendar
months. Upon the occurrence of such an event, the Advisor may, but shall not be
obligated to, reallocate Fund assets among the sub-advisers so as to provide for
more equal distribution of Fund assets among the sub-advisers and itself. The
Advisor may effect such rebalancing by reallocating existing Fund assets or by
changing the allocation of Fund Net Flows, in its sole discretion. The Advisor
shall provide each sub-adviser affected by such reallocation with at least 30
days prior written notice thereof.
3. Obligations of Services to be Provided by the Subadvisor. The
Subadvisor undertakes to provide the following services and to assume the
following obligations:
a. The Subadvisor shall have complete discretion to manage the
investment and reinvestment of the portfolio assets of the Account, all without
prior consultation with the Advisor, subject to and in accordance with (i) the
investment objective and policies of the Fund set forth in the Fund's Prospectus
and Statement of Additional Information as from time to time in effect ("the
Governing Documents") (ii) the requirements applicable to registered investment
companies under applicable laws, including without limitation the Investment
Company Act of 1940 ("1940 Act") and Subchapter M of the Internal Revenue Code
of 1986, as amended ("the Code") and (iii) any written instructions which the
Advisor or the Trust's Board of Trustees may issue from time-to-time; provided,
however, that for purposes of determining compliance with the Governing
Documents and with applicable law, the Subadvisor may treat the Account as if it
constituted the entire Fund. The Subadvisor shall have no responsibility with
respect to the Fund's assets other than the assets in the Account. The
Subadvisor also agrees to conduct its activities hereunder in accordance with
any applicable procedures or policies adopted by the Trust's Board of Trustees
as from time to time in effect and provided in writing to the Subadvisor ("the
Procedures"). The Advisor has provided to the Subadvisor copies of all Governing
Documents and Procedures and shall promptly provide to the Subadvisor any
amendments or supplements thereto. Advisor shall send such amendments to
Subadvisor promptly, and Subadvisor shall be obliged to follow such amended
procedures as of the date of their receipt or the effective date of such
amendments, whichever is later. Subject to and in pursuance of the foregoing,
the Subadvisor shall make all determinations with respect to the purchase and
sale of portfolio securities with full power and authority to engage in such
transactions, and shall take such action necessary to implement any such
transactions. The Subadvisor shall render such reports to the Trust's Board of
Trustees and the Advisor as they may reasonably request concerning the
investment activities of the Account. Unless the Advisor gives the Subadvisor
written instructions to the contrary, the Subadvisor shall, in good faith and in
a manner which it reasonably believes best serves the interests of the Account's
shareholders, vote such proxies as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders of securities held in the
Account. Subadvisor has the authority to tender or convert any securities in the
Account; to execute waivers, consents and other instruments with respect to such
securities; and to endorse, transfer or deliver such securities or to consent to
any class action, plan or reorganization, merger, combination, consolidation,
liquidation or similar plan with reference to such securities.
b. The Advisor may direct the Subadvisor to effect up to 25% of all
transactions in portfolio securities for the Account through broker-dealers in a
manner that will help generate resources to pay the cost of certain expenses
that the Trust is required to pay or for which the Trust is required to arrange
payment or for any other lawful purposes. The Subadvisor will treat such a
direction as a decision by the Advisor to retain, to the extent of the
direction, the discretion that the Subadvisor otherwise would exercise to select
broker-dealers and negotiate commissions for the Account. There may be occasions
when the Subadvisor is unable to obtain best execution because, for example, the
selected broker may not be as efficient in executing transactions as another
broker would be, the trade cannot be aggregated with other trades sent to other
brokers, or for other reasons. Absent instructions of the Advisor to the
contrary, the Subadvisor shall, in the name of the Fund, place orders for the
execution of portfolio transactions with or through such brokers, dealers or
other financial institutions as it may select. The Subadvisor shall seek to
obtain best execution of all portfolio transactions executed on behalf of the
Fund if the Subadvisor selects the broker and otherwise has meaningful control
of the execution, provided that, so long as the Subadvisor has complied with
Section 28(e) of the Securities Exchange Act of 1934, the Subadvisor may cause
the Fund to pay a commission on a transaction in excess of the amount of
commission another broker-dealer would have charged. Specifically, the
Subadvisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker-dealer that provides brokerage or research
services to the Subadvisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer offering equally good execution capability in the portfolio
investment would have charged for effecting that transaction if the Subadvisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage or research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Subadvisor's overall responsibilities with respect to the Fund and to other
clients of the Subadvisor as to which the Subadvisor exercises investment
discretion.
c. Subadvisor may use any entity affiliated with it, including Banc of
America Securities, LLC ("BAS"), as a broker or dealer ("affiliated broker") to
execute trades for the Fund. An affiliated broker generally will not act as
principal for its own account, but will act as agent for other persons including
the Fund. An affiliated broker may execute transactions for the Fund on an
exchange floor, and receive and retain all commissions, fees, and benefits. An
affiliated broker also may execute agency cross trades, in which the affiliated
broker acts as broker for another customer in the same transaction in which it
acts as broker for the Fund. Subadvisor will comply with all applicable legal
requirements, including Rule 17e-1 under the Investment Company Act and Rule
206(3)-2 under the Investment Advisers Act and with the Procedures. Advisor is
aware that the affiliation between the Subadvisor and an affiliated broker (such
as BAS) could give the Subadvisor or its parent, Bank of America Corporation, an
indirect interest in brokerage commissions received by the affiliated broker
(such as BAS). This could create a potential conflict of interest when the
Subadvisor considers whether to use an affiliated broker. Advisor is also aware
that agency cross trades could create potentially conflicting divisions of
loyalties and responsibilities, because the affiliated broker acts for and
receives commissions from both parties, while the Subadvisor advises the Fund to
enter into the trade. The Subadvisor will use an affiliated broker only when it
believes that this is in the Fund's best interests because the broker is
expected to provide best execution. Advisor may at any time revoke its consent
to the execution of future agency cross trades for its account by giving written
notice to Subadvisor or the affiliated broker, which will become effective after
receipt.
d. In connection with the placement of orders for the execution of the
portfolio transactions of the Account, the Subadvisor shall create and maintain
all necessary records pertaining to the purchase and sale of securities by the
Subadvisor on behalf of the Account in accordance with all applicable laws,
rules and regulations, including but not limited to records required by Section
31(a) of the 1940 Act. All records shall be the property of the Trust and shall
be available for inspection and use by the Securities and Exchange Commission
("SEC") as required by applicable law, the Trust, the Advisor or any person
retained by the Trust at all reasonable times. Where applicable, such records
shall be maintained by the Subadvisor for the periods and in the places required
by Rule 31a-2 under the 1940 Act.
e. The Subadvisor shall bear its expenses of providing services
pursuant to this Agreement. However, the Subadvisor shall not be obligated to
pay any expenses of Advisor or the Fund, including without limitation, interest
and taxes, brokerage commissions and other costs associated with the purchase or
sale of securities and other investment instruments, custodian fees, and other
Account expenses.
4. Custody. Subadvisor will at no time have custody or physical control
of the cash and assets in the Account, and will not be liable for any act or
omission of the Fund's Custodian.
5. Compensation of the Subadvisor. In full consideration of services
rendered pursuant to this Agreement, the Advisor will pay the Subadvisor a fee
at the annual rate set forth in Schedule A hereto of the value of the Account's
average daily net assets. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month. If the Subadvisor shall serve
for less than the whole of any month, the foregoing compensation shall be
prorated. For the purpose of determining fees payable to the Subadvisor, the
value of the Account's net assets shall be computed at the times and in the
manner that the Fund's net assets are computed, as specified in the Governing
Documents.
6. Other Activities of the Subadvisor. The services of the Subadvisor
hereunder are not to be deemed exclusive, and the Subadvisor shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. The Subadvisor may give advice
and take action with respect to other clients that may differ from the advice
given to or the actions taken for the Fund, in terms of securities, timing,
nature of transactions and other factors, so long as Subadvisor, to the extent
practicable, attempts in good faith to allocate investment opportunities on a
fair and equitable basis among its clients, including the Fund, taking into
account factors such as their different investment objectives, restrictions, and
cash positions. Other clients of Subadvisor, as well as Subadvisor, its
principals, employees, affiliates and their family members, may hold and engage
in transactions in securities also purchased or sold for the Fund, or about
which Subadvisor has given advice to the Fund. Subadvisor has no obligation to
purchase, sell or make recommendations for the Fund concerning any security
which Subadvisor purchases, sells or recommends to any other client, or any
security in which Subadvisor, its principals, employees, affiliates or their
family members may invest.
7. Use of Names. The Advisor shall not use the name of the Subadvisor
or any of its affiliates in any prospectus, sales literature or other material
relating to the Trust or the Fund in any manner not approved prior thereto by
the Subadvisor; provided, however, that the Advisor may use the name of the
Subadvisor and its affiliates in any such material that merely refers in
accurate terms to the Subadvisor's appointment hereunder. The Subadvisor shall
not use the name of the Trust or the Advisor in any material relating to the
Subadvisor in any manner not approved prior thereto by the Advisor; provided,
however, that the Subadvisor may use the name of the Advisor or the Trust in any
material that merely refers in accurate terms to the appointment of the
Subadvisor hereunder.
8. Liability of the Subadvisor. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Subadvisor, the Subadvisor shall not be liable for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security. No statement in this Agreement or any other document constitutes a
representation by Subadvisor regarding the rate of growth or return of the
Account. Neither Subadvisor nor any of its officers, directors or employees make
any representations or warranties, express or implied, that any level of
performance or investment results will be achieved by the Account or that the
Account will perform comparably with any standard or index, including other
clients of Subadvisor, whether public or private. Subject to the foregoing,
nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
9. Limitation of Trust's Liability. The Subadvisor acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Subadvisor agrees that
any of the Trust's obligations shall be limited to the assets of the Fund and
that the Subadvisor shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
10. Advisor Representations. Advisor represents that: (i) the retention
of Subadvisor by Advisor as contemplated by this Agreement is authorized by the
respective governing documents of the Trust and the Advisor; (ii) the execution,
delivery and performance of this Agreement does not violate any obligation by
which the Trust or the Advisor or their respective property is bound, whether
arising by contract, operation of law or otherwise; (iii) this Agreement has
been duly authorized by appropriate action of the Trustees and Advisor and when
executed and delivered will be a legal, valid and binding obligation of the
Advisor, enforceable against the Advisor in accordance with its terms, subject,
as to enforcement, to laws affecting creditors' rights generally and general
equitable principles; (iv) Advisor has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act and instituted
procedures reasonably necessary to prevent access persons under Rule 17j-1 from
violating the code of ethics; (v) Advisor is not prohibited by applicable law,
regulation or order from performing the services contemplated by this Agreement;
(vi) Advisor will promptly notify Subadvisor of the occurrence of any event that
would disqualify Advisor from serving as investment manager of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; and (vii) Advisor
has received Part II of Subadvisor's current Form ADV.
11. Subadvisor Representations. Subadvisor represents that: (i) the
execution, delivery and performance of this Agreement does not violate any
obligation by which the Subadvisor is bound, whether arising by contract,
operation of law or otherwise; (ii) this Agreement has been duly authorized by
appropriate action of the Subadvisor and when executed and delivered will be a
legal, valid and binding obligation of the Subadvisor, enforceable in accordance
with its terms; (iii) Subadvisor is registered as an investment adviser under
the Advisers Act; (iv) Subadvisor has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act and instituted procedures
reasonably necessary to prevent access persons under Rule 17j-1 from violating
the code of ethics; (v) Subadvisor is not prohibited by applicable law,
regulation or order from performing the services contemplated by this Agreement;
and (vi) Subadvisor will promptly notify Advisor of the occurrence of any event
that would disqualify Subadvisor from serving as investment manager of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
12. Renewal, Termination and Amendment. This Agreement shall continue
in effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance is specifically approved at least annually by vote of the holders of
a majority of the outstanding voting securities of the Fund or by vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated at any time without
payment of any penalty, by the Trust's Board of Trustees, by the Advisor, or by
a vote of a majority of the outstanding voting securities of the Fund upon 60
days' prior written notice to the Subadvisor or by the Subadvisor upon 60 days'
prior written notice to the Advisor, or upon such shorter notice as may be
mutually agreed upon. This Agreement shall terminate automatically and
immediately upon termination of the Investment Advisory and Management Agreement
between the Advisor and the Trust. This Agreement shall terminate automatically
and immediately in the event of its assignment. The terms "assignment" and a
vote of a majority of the outstanding voting securities shall have the meaning
set forth for such terms in the 1940 Act. This Agreement may be amended at any
time by the Subadvisor and the Advisor, subject to approval by the Trust's Board
of Trustees and, if required by applicable SEC rules and regulations, a vote of
a majority of the Fund's outstanding voting securities. Any amendment must be in
writing and signed by both parties. Upon any termination of this Agreement,
Subadvisor retains the right to complete any transactions open as of the
termination date and to retain amounts in the Account to effect their
completion. Upon any termination, it is Advisor's responsibility to issue
written instructions regarding assets in the Account. Fees will be prorated to
the date of any termination.
13. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as required by law, rule or regulation or in the ordinary course
of the Advisor's or Subadvisor's carrying out its duties as anticipated by this
agreement. The Advisor hereby consents to the disclosure to third parties of
investment results and other data of the Account in connection with providing
composite investment results and related information of the Subadvisor.
14. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statue, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
15. Notices. Any notices hereunder shall be in writing, duly signed by
the party giving such notice, and shall be effective when received by the party
to whom addressed at the address indicated below or to such other address as a
party may designate in writing to the other party.
Advisor:
Evergreen Investment Management Company, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxx
Subadvisor:
Xxxxxxx Capital Management, LLC
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
16. Miscellaneous. This Agreement, including the Schedules attached
hereto, constitutes the full and complete agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements,
negotiations, representations and proposals, whether written or oral. Each party
agrees to perform such further actions and execute such further documents as are
necessary to effectuate the purposes hereof. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the Commonwealth of
Massachusetts. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on the parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
EVERGREEN INVESTMENT MANAGEMENT COMPANY, LLC
By: _________________________
Authorized Officer
XXXXXXX CAPITAL MANAGEMENT, LLC
By: ___________________________
President
SCHEDULE A
Evergreen Masters Fund 0.50% of average daily net assets of the
Account.
