AQUILA THREE PEAKS HIGH INCOME FUND
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made as of June 10, 2007 by and between AQUILA INVESTMENT
MANAGEMENT LLC, a Delaware limited liability company (the "Manager"), 000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 and THREE PEAKS CAPITAL
MANAGEMENT, LLC (the "Sub-Adviser"), a Colorado limited liability company, 0000
XXX Xxxxxxx, Xxxxx 0000, Xxxxxxxxx Xxxxxxx, XX 00000.
W I T N E S S E T H :
WHEREAS, Aquila Three Peaks High Income Fund (the "Fund") is a
Massachusetts business trust which is registered under the Investment Company
Act of 1940 (the "Act") as an open-end, diversified management investment
company;
WHEREAS, the Manager has entered into an Advisory and Administration
Agreement with the Fund as of March 21, 2006, amended as of May 24, 2006 (the
"Advisory and Administration Agreement"), pursuant to which the Manager acts as
investment adviser with respect to the Fund; and
WHEREAS, pursuant to paragraph 2 of the Advisory and Administration
Agreement, the Manager retains the Sub-Adviser for purposes of rendering
investment advisory services to the Manager and to the Fund upon the terms and
conditions hereinafter set forth;
WHEREAS, the shareholder of the Fund initially approved the Advisory
and Administrative Agreement and this Agreement without the amendments thereto
at a meeting of shareholders held on March 21, 2006, and approved amendments to
the Advisory and Administrative Agreement and this Agreement on May 24, 2006;
and
WHEREAS, the parties wish to restate this Agreement, to include
amendments not requiring shareholder consent;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. In General
The Manager hereby appoints the Sub-Adviser to render, to the Manager
and to the Fund, investment research and advisory services as set forth below
under the supervision of the Manager and subject to the approval and direction
of the Board of Trustees of the Fund. The Sub-Adviser shall, all as more fully
set forth herein, act as investment adviser to the Fund with respect to the
investment of the Fund's assets, and supervise and arrange the purchase of
securities for and the sale of securities held in the portfolio of the Fund.
2. Duties and Obligations of the Sub-Adviser With Respect To Investment of the
Assets of the Fund
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Manager and the Board of Trustees of the Fund,
the Sub-Adviser shall:
(i) supervise continuously the investment program of the Fund and the
composition of its portfolio;
(ii) determine what securities shall be purchased or sold by the Fund;
(iii) arrange for the purchase and the sale of securities held in the portfolio
of the Fund; and
(iv) consult with the Manager in connection with its duties hereunder.
(b) Any investment program furnished by the Sub-Adviser under this
section shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the Investment Company Act of 1940 (the "Act") and
any rules or regulations in force thereunder; (2) any other applicable laws,
rules and regulations; (3) the Declaration of Trust and By-Laws of the Fund as
amended from time to time; (4) any policies and determinations of the Board of
Trustees of the Fund; and (5) the fundamental policies of the Fund, as reflected
in its registration statement under the Act or as amended by the shareholders of
the Fund.
(c) The Sub-Adviser shall give to the Manager and to the Fund the
benefit of its best judgment and effort in rendering services hereunder, but the
Sub-Adviser shall not be liable for any loss sustained by reason of the adoption
of any investment policy or the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon (i)
its own investigation and research or (ii) investigation and research made by
any other individual, firm or corporation, if such purchase, sale or retention
shall have been made and such other individual, firm or corporation shall have
been selected in good faith by the Sub-Adviser.
(d) Except as provided in section 7, nothing in this Agreement shall
prevent the Sub-Adviser or any affiliated person (as defined in the Act) of the
Sub-Adviser from acting as investment adviser or manager for any other person,
firm or corporation, and shall not in any way limit or restrict the Sub-Adviser
or any such affiliated person from buying, selling or trading any securities for
its own or their own accounts or for the accounts of others for whom it or they
may be acting, provided, however, that the Sub-Adviser expressly represents
that, while acting as Sub-Adviser, it will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations to the Fund
under this Agreement. The Manager hereby acknowledges that the Sub-Adviser
renders investment advisory and managerial services to many different clients
and, therefore, may give investment advice and take action with respect to any
of its other clients which may differ from the advice given or action taken
under this Agreement.
(e) In connection with its duties to arrange for the purchase and sale
of the Fund's portfolio securities, the Sub-Adviser shall select such
broker-dealers ("dealers") as shall, in the Sub-Adviser's judgment, implement
the policy of the Fund to achieve "best execution," i.e., prompt, efficient, and
reliable execution of orders at the most favorable net price. The Sub-Adviser
shall cause the Fund to deal directly with the selling or purchasing principal
or market maker without incurring brokerage commissions unless the Sub-Adviser
determines that better price or execution may be obtained by paying such
commissions; the Fund expects that most transactions will be principal
transactions at net prices and that the Fund will incur little or no brokerage
costs. The Fund understands that purchases from underwriters include a
commission or concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread between the bid
and asked prices. In allocating transactions to dealers, the Sub-Adviser is
authorized to consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial condition and
risk in positioning the securities involved, as well as the difficulty of the
transaction in question, and thus need not pay the lowest spread or commission
available if the Sub-Adviser determines in good faith that the amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the particular
transaction or the Sub-Adviser's overall responsibilities. If, on the foregoing
basis, the transaction in question could be allocated to two or more dealers,
the Sub-Adviser is authorized, in making such allocation, to consider whether a
dealer has provided research services, as further discussed below. Such research
may be in written form or through direct contact with individuals and may
include quotations on portfolio securities and information on particular issuers
and industries, as well as on market, economic, or institutional activities. The
Fund recognizes that no dollar value can be placed on such research services or
on execution services and that such research services may or may not be useful
to the Fund and may be used for the benefit of the Sub-Adviser or its other
clients.
(f) The Sub-Adviser agrees to maintain, and to preserve for the periods
prescribed, such books and records with respect to the portfolio transactions of
the Fund as are required by applicable law and regulation, and agrees that all
records which it maintains for the Fund on behalf of the Manager shall be the
property of the Fund and agrees upon reasonable request to provide to the Fund
or the Manager copies of any and all records it maintains in accordance with
this Agreement.
(g) The Sub-Adviser agrees to furnish to the Manager and to the Board
of Trustees of the Fund such periodic and special reports as each may reasonably
request.
(h) It is agreed that the Sub-Adviser shall have no responsibility or
liability for the accuracy or completeness of the Fund's Registration Statement
under the Act and the Securities Act of 1933, except for information supplied by
the Sub-Adviser for inclusion therein. The Sub-Adviser shall promptly inform the
Fund as to any information concerning the Sub-Adviser appropriate for inclusion
in such Registration Statement, or as to any transaction or proposed transaction
which might result in an assignment (as defined in the Act) of this Agreement.
(i) The Sub-Adviser shall not be liable for any error in judgment or
for any loss suffered by the Manager, the Fund or its security holders in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Nothing in this Agreement shall, or
shall be construed to, waive or limit any rights which the Fund may have under
federal and state securities laws which may impose liability under certain
circumstances on persons who act in good faith.
(j) To the extent that the Manager is indemnified under the Fund's
Declaration of Trust with respect to the services provided hereunder by the
Sub-Adviser, the Manager agrees to provide the Sub-Adviser the benefits of such
indemnification.
3. Allocation of Expenses
The Sub-Adviser shall bear all of the expenses it incurs in fulfilling
its obligations under this Agreement. In particular, but without limiting the
generality of the foregoing: the Sub-Adviser shall furnish, at the Sub-Adviser's
expense, all office space, facilities, equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The Sub-Adviser
shall supply, or cause to be supplied, to any investment adviser, administrator
or principal underwriter of the Fund all necessary financial information for
which the Sub-Adviser is responsible in connection with such adviser's,
administrator's or principal underwriter's duties under any agreement between
such adviser, administrator or principal underwriter and the Fund. The
Sub-Adviser will also pay all compensation of the Fund's officers, employees,
and Trustees, if any, who are affiliated persons of the Sub-Adviser.
4. Compensation of the Sub-Adviser
The Manager agrees to pay the Sub-Adviser, and the Sub-Adviser agrees
to accept as full compensation for all services rendered by the Sub-Adviser as
such, a management fee payable monthly and computed on the net asset value of
the Fund as of the close of business each business day at the annual rate of
0.45 of 1% of such net asset value on net assets of the Fund up to $100,000,000;
0.40 of 1% of the Fund's net assets above $100,000,000 to $250,000,000 and 0.35
of 1% of the Fund's net assets above $250,000,000.
5. Duration and Termination
(a) This Agreement shall become effective as of the date first written
above following approval by the shareholders of the Fund and shall, unless
terminated as hereinafter provided, continue in effect until the September 30
next preceding the second anniversary of the effective date of this Agreement,
and from year to year thereafter, but only so long as such continuance is
specifically approved at least annually (1) by a vote of the Fund's Board of
Trustees, including a vote of a majority of the Trustees who are not parties to
this Agreement or "interested persons" (as defined in the Act) of any such
party, with votes cast in person at a meeting called for the purpose of voting
on such approval, or (2) by a vote of the holders of a "majority" (as so
defined) of the outstanding voting securities of the Fund and by such a vote of
the Trustees.
(b) This Agreement may be terminated by the Sub-Adviser at any time
without penalty upon giving the Manager and the Fund sixty days' written notice
(which notice may be waived). This Agreement may be terminated by the Manager or
the Fund at any time without penalty upon giving the Sub-Adviser sixty days'
written notice (which notice may be waived by the Sub-Adviser), provided that
such termination by the Fund shall be directed or approved by a vote of a
majority of its Trustees in office at the time or by a vote of the holders of a
majority (as defined in the Act) of the voting securities of the Fund
outstanding and entitled to vote. This Agreement shall automatically terminate
in the event of its assignment (as defined in the Act) or the termination of the
Advisory and Administration Agreement.
6. Notices of Meetings
The Manager agrees that notice of each meeting of the Board of Trustees
of the Fund will be sent to the Sub-Adviser and that Sub-Adviser will make
appropriate arrangements for the attendance (as persons present by invitation)
of such person or persons as the Sub-Adviser may designate.
7. Special Provisions
For the duration of this Agreement, the Sub-Adviser agrees that the
Sub-Adviser shall not provide portfolio management for investment companies
registered under the Investment Company Act of 1940 which have an objective,
investment strategy and distribution channel similar to that of the Fund without
the prior written consent of the Manager, except that without the consent of the
Manager the Sub-Adviser may provide portfolio management to any registered
investment company which is an investment option offered by an insurance company
under a variable annuity contract, a variable life insurance policy or a
qualified retirement plan.
8. Separability
If at any time any provision of this Agreement is or becomes illegal,
invalid, or unenforceable in any respect, the legality, validity, and
enforceability of the remaining provisions will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunto affixed, all as of the day and year first above written.
ATTEST: AQUILA INVESTMENT MANAGEMENT LLC
By:
------------------- -----------------------------
ATTEST: THREE PEAKS CAPITAL MANAGEMENT, LLC
By:
------------------- -----------------------------
