THE ARBOR FUND
OVB PRIME OBLIGATIONS PORTFOLIO
INVESTMENT SUB ADVISORY AGREEMENT
AGREEMENT made this 22nd day of November, 1993, by and among One Valley
Bank, N.A., a national banking association (the "Adviser"), Wellington
Management Company, a Massachusetts general partnership (the "Sub-Adviser") and
The Arbor Fund, a Massachusetts business trust (the "Trust").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated November 22, 1993 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the OVB Prime Obligations
Portfolio (the "Portfolio"); and
WHEREAS, the Adviser and the Trust each desire to retain the Sub-Adviser to
provide investment advisory services to the Trust in connection with the
management of the Portfolio, and the Sub-Adviser is willing to render such
investment advisory services
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Trust's Board of
Trustees, the Sub-Adviser shall manage the investment operations of
the Portfolio and the composition of the Portfolio's portfolio,
including the purchase, retention and disposition thereof, in
accordance with the Portfolio's investment objectives, policies and
restrictions as stated in the Portfolio's Prospectus (such Prospectus
and the 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:
(1) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments and
securities will be purchased, retained or sold by the Portfolio,
and what portion of the costs will 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
Trust's Declaration of Trust and the Prospectus and with the
instructions and directions of the Adviser and of the Board of
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986,
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 Portfolio and will place orders with or through such persons, brokers
or dealers to carry out the policy with respect to brokerage set forth in
the Portfolio's Registration Statement (as defined herein) and Prospectus
or as the Board of Trustee or the Adviser may direct from time to time, in
conformity with federal securities laws. In providing the Portfolio 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 Portfolio
that the Sub-Adviser have access to supplemental investment and market
research and security and economic analysis provided by brokers who may
execute brokerage transactions at higher cost to the Portfolio 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 Portfolio with such brokers, subject to review by the
Trust's Board of Trustees 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 the 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 obligation to the Portfolio and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect to the
Portfolio's portfolio transactions required by subparagraphs (b)(5),
2
(6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1
under the 1940 Act and shall render to the Trust's Board of
Trustees such periodic and special reports as the Trust's Board
of Trustees may reasonably request.
(5) The Sub-Adviser shall provide the Portfolio's Custodian on each
business day with information relating to all transactions
concerning the Portfolio'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 Trust.
(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 partners,
officers or employees.
(c) The Sub-Adviser shall keep the Portfolio'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 Portfolio
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 Portfolio and the Sub-Adviser will surrender promptly to the
Portfolio any of such records upon the 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:
(a) The Trust's Declaration of Trust, as filed with the Secretary of State
of Massachusetts (such Declaration of Trust, as in effect on the date
of this Agreement and as amended from time to time, herein called the
"Declaration
3
of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the "By-
Laws");
(c) Certified resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and the Sub-Adviser with respect to the
Portfolio, and approving the form of this Agreement;
(d) Registration Statement 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 Portfolio and shares of the Portfolio's beneficial
shares, and all amendments thereto;
(e) Notification of Registration of the Trust under the 1940 Act on Form
N-8A as filed with the Commission, and all amendments thereto; and
(f) Prospectus of the Portfolio.
4. For the services to be provided by the Sub-Adviser pursuant to this
Agreement, the Portfolio will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate of 0.075% on the first $500 million and
0.020% on the excess of $500 million of the aggregate average daily net
assets of the Trust's money market portfolios to which the Sub-Adviser
serves as sub-adviser, pro rated based on the Portfolio's average daily net
assets. This fee will be computed daily and paid to the Sub-Adviser
monthly.
5. The Sub-Adviser shall not be liable for any error of judgment or for any
loss suffered by the 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 continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved
at least annually in conformance with the 1940 Act; provided, however, that
this Agreement may be
4
terminated (a) by the Portfolio at any time, without the payment of any
penalty, by the vote of a majority of Trustees of the Trust or by the vote
of a majority of the outstanding voting securities of such Portfolio, (b)
by the Adviser at any time, without the payment of any penalty, on not more
than 60 days' nor less than 30 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 shall
terminate automatically and immediately in the event of its assignment. As
used in this Section 6, the terms "assignment" and "vote of a majority of
the outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject to
such exceptions as may be granted by the Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's partners, 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 stockholders, sales literature or other materials prepared for
distribution to stockholders of the Portfolio, the Trust 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.
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 Portfolio.
10. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts; provided, however, that nothing herein shall be construed as
being inconsistent with the 1940 Act.
5
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:
One Valley Bank, National Association
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To the Sub-Adviser at:
Wellington Management Company
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Trust or the Portfolio at:
The Arbor Fund
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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.
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.
ONE VALLEY BANK, N.A. WELLINGTON MANAGEMENT COMPANY
By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------- --------------------------------
Title: Senior Vice President Title: Chairman
----------------------- -----------------------------
THE ARBOR FUND
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Title: Vice President
-----------------------
7