INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT, made as of the 20th day of November, 2001, by and between OPPENHEIMERFUNDS, INC., a
Colorado corporation ("OFI"), and TREMONT PARTNERS, INC., a Connecticut corporation ("Tremont").
RECITAL
WHEREAS, Xxxxxxxxxxx Tremont Market Neutral Fund, LLC, a Delaware limited liability company
(the "Fund"), is registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"),
with the Securities and Exchange Commission (the "Commission") as a closed- end management investment company;
WHEREAS, OFI has entered into an Investment Advisory Agreement with the Fund dated as of
November 20, 2001 (the "Investment Advisory Agreement"), pursuant to which OFI has been appointed to serve as the
investment adviser of the Fund and pursuant to which OFI is authorized to retain investment subadvisers
affiliated with OFI to provide any or all of the services required to be provided by OFI under the Investment
Advisory Agreement;
WHEREAS, Tremont is an affiliate of OFI that is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment adviser and engages in the business of rendering
investment advice;
WHEREAS, OFI desires that Tremont shall act as the investment subadviser to the Fund pursuant
to this Agreement and Tremont desires to act in such capacity;
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, it is agreed by
and between the parties, as follows:
1. GENERAL PROVISIONS.
OFI hereby appoints Tremont to render to OFI, with respect to the Fund, investment research and
advisory services as set forth below in Section 2, under the supervision of OFI and subject to the approval and
direction of the Fund's Board of Managers (the "Board"), and Tremont hereby accepts such appointment, subject to
the terms and conditions contained herein. Tremont shall, for purposes of this Agreement, be deemed an
independent contractor and shall not have, except as expressly provided or authorized herein, any authority to
act for or represent OFI or the Fund in any way or otherwise to serve as or to be deemed an agent of the Fund.
Tremont shall, in all matters, give to OFI, the Fund and the Board of Managers of the Fund (the "Board") the
benefit of its best judgment, effort, advice and recommendations and shall at all times, conform to and use its
best efforts to enable the Adviser and the Fund to conform to (i) the provisions of the Investment Company Act
and any rules or regulations thereunder; (ii) any other applicable provisions of state or Federal law; (iii) the
provisions of the Limited Liability Company Agreement of the Fund, as amended from time to time (the "LLC
Agreement"); (iv) policies and determinations of the Board, (v) the investment policies and investment
restrictions of the Fund as reflected in the registration statement of the Fund under the Investment Company Act
or as such policies may, from time to time, be amended; and (v) the Prospectus and Statement of Additional
Information of the Fund in effect, as they may be amended from time to time. The appropriate officers and
employees of Tremont shall be available upon reasonable notice for consultation with any members of the Board or
officers of the Fund or the Adviser with respect to any matters dealing with the business and affairs of the Fund
including, without limitation, review of the general investment strategy of the Fund, economic considerations and
general conditions affecting the marketplace.
2. DUTIES OF TREMONT AND OFI.
(a) Duties of Tremont.
Tremont shall regularly provide investment advice with respect to the Fund and shall,
subject to the terms of this Agreement, continuously supervise the investment and reinvestment of cash,
securities and instruments or other property comprising the assets of the Fund, and in furtherance
thereof, Tremont's duties and authority shall include:
(A) Selecting alternative asset managers ("Portfolio Managers") with whom to invest the Fund's assets,
either through private investment funds that they manage ("Portfolio Funds") or
directly through separate managed accounts or separate investment vehicles managed by
a Portfolio Manager and in which the Fund is the only investor ("Portfolio Accounts"),
on the basis of various criteria relating to their skills and ability to execute their
investment programs, consistent with the Fund's overall investment objective and
strategies; provided, however, that the Fund's participation in Portfolio Accounts
will be subject to approval at least annually by the Board, including the vote of the
majority of the Managers who are not parties to this Agreement or "interested persons"
(as defined in the Investment Company Act and the rules thereunder) of any such party,
cast in person at a meeting called for the purpose of voting on such approval, or by
the holders of a "majority of the outstanding voting securities of the Fund" (as
defined in the Investment Company Act), subject in such case to the approval by a vote
of the majority of the Managers who are not parties to this Agreement or "interested
persons" (as defined in the Investment Company Act and the rules thereunder) of any
such party, cast in person at a meeting called for the purpose of voting on such
approval;
(B) Determining how the Fund's assets should be allocated among the Portfolio Managers and regularly
reporting on the Fund's portfolio holdings to OFI and, at the request of OFI, to the
Board;
(C) Obtaining and evaluating pertinent information about significant developments and economic, statistical
and financial data, domestic, foreign or otherwise, whether affecting the economy
generally or the Fund, and whether concerning the Portfolio Managers or the activities
in which such Portfolio Managers engage; and
(D) Taking such actions incident to implementation of the Fund's investment program, or as otherwise
directed by OFI, including: (i) executing investment advisory, subscription, and such
other agreements in connection with investing the Fund's assets in Portfolio Funds or
Portfolio Accounts; (ii) transmitting withdrawal requests to Portfolio Funds and
Portfolio Accounts, either at the request of OFI in connection with periodic
repurchases of member interests in the Fund ("Interests") by the Fund or as part of
Tremont's investment program; and (iii) such other actions as Tremont deems necessary
or appropriate in executing its duties under this Agreement.
(E) Nothing in this Agreement shall prevent Tremont or any affiliate thereof from acting as investment
adviser for any other person, firm, fund, corporation or other entity and shall not in
any way limit or restrict Tremont, or any of its affiliates, or their respective
directors, officers, stockholders or employees from buying, selling or trading any
securities or other investments for its or their own account or for the account of
others for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by Tremont of its duties and
obligations under this Agreement and under the Advisers Act and further provided that
such activities do not violate any provisions of the code of ethics of Tremont
governing personal securities trading by persons who are "access persons," as defined
by such code, of the Fund.
(b) Duties of OFI.
Without limiting the obligations of Tremont under this Agreement, OFI shall monitor
the investment program maintained by Tremont for the Fund to ensure that the Fund's assets are invested
in compliance with this Agreement and consistent with the investment objective and investment policies
of the Fund as recited in its Prospectus and Statement of Additional Information, as they may be amended
from time to time.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Representations, Warranties and Covenants of Tremont.
(A) Tremont is now, and will continue to be, a corporation duly formed and validly existing under the laws
of its jurisdiction of formation, fully authorized to enter into this Agreement and
carry out its duties and obligations hereunder.
(B) Tremont is registered as an investment adviser with the Commission under the Advisers Act. Tremont
shall maintain such registration in effect at all times during the term of this
Agreement.
(C) Tremont at all times shall provide its best judgment and effort to OFI and the Fund in carrying out its
obligations hereunder.
(b) Other Covenants. Tremont further agrees that:
(A) as required by applicable laws and regulations, it will maintain books and records with respect to the
Fund's securities transactions and it will furnish to OFI and to the Board such
periodic and special reports as OFI or the Board may reasonably request; and
(B) it will treat confidentially and as proprietary information of the Fund all records and other
information relative to the Fund, and will not use records and information for any
purpose other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by OFI or the Fund or when so
requested by OFI or the Fund, or required by law or regulation.
(c) Representations, Warranties and Covenants of OFI.
(A) OFI is now, and will continue to be, duly organized and in good standing under the laws of its state of
incorporation, fully authorized to enter into this Agreement and to carry out its
duties and obligations hereunder.
(B) OFI is registered as an investment adviser with the Commission under the Advisers Act. OFI shall
maintain such registration in effect at all times during the term of this Agreement.
(C) OFI at all times shall provide its best judgment and effort to the Fund in carrying out its obligations
hereunder.
4. CONTROL BY THE BOARD.
Any investment program undertaken by Tremont pursuant to this Agreement, as well as any other
activities undertaken by Tremont with respect to the Fund, shall at all times be subject to any directives of OFI
and the Board.
5. BOOKS AND RECORDS.
Tremont agrees that all records that it maintains for the Fund, on behalf of OFI, are the
property of the Fund and further agrees to surrender promptly to the Fund or to OFI any of such records upon
request. Tremont further agrees to preserve for the periods prescribed by applicable laws, rules and regulations
all records required to be maintained by Tremont on behalf of OFI under such applicable laws, rules and
regulations, or such longer period as OFI may reasonably request from time to time.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) Tremont is authorized, in arranging the purchase and sale of the portfolio securities and other
investments of the Fund to employ or deal with such members of securities or commodities exchanges,
brokers or dealers, including "affiliated" broker-dealers, as may, in its best judgment, implement the
policy of the Fund to obtain, at reasonable expense, the "best execution" (prompt and reliable execution
at the most favorable security price obtainable) of the portfolio transactions of the Fund as well as to
obtain, consistent with the provisions of the subparagraph (c) of this paragraph 6, the benefit of such
investment information or research as may be of significant assistance to the performance by Tremont of
its investment advisory functions.
(b) Tremont shall select broker-dealers to effect the portfolio transactions of the Fund on the basis of its
estimate of their ability to obtain best execution of particular and related portfolio transactions.
The abilities of a broker-dealer to obtain best execution of particular portfolio transactions will be
judged by Tremont on the basis of all relevant factors and considerations including, insofar as
feasible, the execution capabilities required by the transactions or transactions; the ability and
willingness of the broker-dealer to facilitate the portfolio transactions of the Fund by participating
therein for its own account; the importance to the Fund of speed, efficiency or confidentiality; the
broker-dealer's apparent familiarity with sources form or to whom particular securities or other
investments might be purchased or sold; as well as nay other matters relevant to the selection of a
broker-dealer for particular and related transactions of the Fund.
(c) Tremont shall have discretion, in the interests of the Fund, to allocate brokerage on the portfolio
transactions of the Fund to broker-dealers, other than an affiliated broker-dealer, qualified to obtain
best execution of such transactions who provide research services (as such services are defined in
Section 28(e)(3) of the Securities Exchange Act of 1934) to Tremont, which may assist Tremont in
managing the assets of the Fund or other accounts for which Tremont or any affiliate of Tremont
exercises "investment discretion" (as that term is defined in Section 3(a)(35) of the Securities
Exchange Act of 1934) and to cause the Fund to pay such broker-dealers a commission for effecting a
portfolio transaction for the Fund that is in excess of the amount of commission another broker-dealer
adequately qualified to effect the transaction would have charged for effecting that transaction, if
Tremont determines, in good faith, that such commission is reasonable in relation to the value of the of
the broker or research services provided by such broker-dealer viewed in terms of either that particular
transaction or the overall responsibilities of Tremont or its affiliates with respect to accounts as to
which they exercise investment discretion. In reaching such determination, Tremont will not be required
to place or attempt to place a specific dollar value on the brokerage or research services provided or
being provided by such broker-dealer. In demonstrating that such determinations were made in good
faith, Tremont shall be prepared to show that all commissions were allocated for purposes contemplated
by this Agreement and that the total commissions paid by the Fund over a representative period selected
by the Board were reasonable in relation to the benefits to the Fund.
(d) Tremont shall have no obligation to seek advance competitive bidding for the most favorable commission
rate applicable to any particular portfolio transactions or to select any broker-dealer on the basis of
its purported or "posted" commission rate but will, to the best of its ability, endeavor to be aware of
the current level of the charges of eligible broker-dealers and to minimize the expense incurred by the
Fund for effecting its portfolio transactions to the extent consistent with the interests and policies
of the Fund.
(e) Subject to the foregoing provisions of this paragraph 6, Tremont may also consider sales of Interests as
a factor in the selection of broker-dealers for its portfolio transactions.
7. COMPENSATION OF TREMONT.
(a) In consideration of the services provided by Tremont under this Agreement, OFI will pay Tremont a
monthly fee equal to 50% of the amount of the Management Fee earned by OFI pursuant to the Investment
Advisory Agreement.
(b) Incentive Allocation. OFI has designated Tremont to serve as the Special Advisory Member of the Fund
under the terms of the LLC Agreement and to receive in such capacity the incentive allocation in
accordance with the terms of the LLC Agreement (the Incentive Allocation"). The Incentive Allocation,
if any, will be computed and credited to the capital account of Tremont as provided by the LLC
Agreement.
8. ALLOCATION OF EXPENSES.
Tremont shall pay the expenses incurred by it in providing services under this Agreement,
including, but not limited to, the salaries, employment benefits and other related costs of those of its
personnel engaged in providing investment advice to the Fund hereunder, including, without limitation, office
space, office equipment, telephone and postage costs and other expenses.
9. USE OF NAME "TREMONT."
Tremont hereby grants to the Fund a royalty-free, non-exclusive license to use the "Tremont" in
the name of the Fund for the duration of this Agreement any extensions or renewals thereof. Such license may,
upon termination of this Agreement, be terminated by Tremont, in which event the Fund shall promptly take
whatever action may be necessary to change its name and discontinue and further use of the name "Tremont" in the
name of the Fund or otherwise. The name "Tremont" may be used or licensed by Tremont in connection with any of
its activities, or licensed by Tremont to any other party.
10. DURATION.
This Agreement will take effect on the date first set forth above. Unless earlier terminated
pursuant to paragraph 13 hereof, this Agreement shall remain in effect for a period of two (2) years from such
date and thereafter from year to year, so long as such continuance shall be approved at least annually by the
Board, including the vote of the majority of the Managers who are not parties to this Agreement or "interested
persons" (as defined in the Investment Company Act and the rules thereunder) of any such party, cast in person at
a meeting called for the purpose of voting on such approval, or by the holders of a "majority of the outstanding
voting securities of the Fund" (as defined in the Investment Company Act), subject in such case to the approval
by a vote of the majority of the Managers who are not parties to this Agreement or "interested persons" (as
defined in the Investment Company Act and the rules thereunder) of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
11. LIABILITY OF TREMONT.
In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of Tremont or any of its officers, directors or employees, Tremont
shall not be liable to OFI 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 interest in a Portfolio
Fund or allocation to any Portfolio Manager.
12. ASSIGNMENT OR AMENDMENT.
Any amendment to this Agreement shall be in writing and shall be subject to: (i) the approval
of the Board, including the vote of a majority of the Managers who are not "interested persons," as defined by
the Investment Company Act and the rules thereunder; (ii) the affirmative vote or written consent of the holders
of a "majority of the outstanding voting securities" of the Fund," as defined by the Investment Company Act, to
the extent such a vote of security holders is required by the Investment Company Act. This Agreement shall
automatically and immediately terminate in the event of its "assignment," as defined in the Investment Company
Act.
13. TERMINATION.
This Agreement may be terminated (i) by Tremont at any time without penalty upon sixty days'
written notice to the the other party and the Fund (which notice may be waived by the Fund); or (ii) by the Fund
at any time without penalty upon sixty days' written notice to Tremont and OFI (which notice may be waived by
OFI), provided that such termination by the Fund shall be directed or approved by the Board or by the vote of the
holders of a "majority of the outstanding voting securities" of the Fund, as defined by the Investment Company
Act.
14. NOTICES.
Any notice or other communication required to be or that may be given hereunder shall be in
writing and shall be delivered personally, telecopied, sent by certified, registered or express mail, postage
prepaid or sent by national next-day delivery service and shall be deemed given when so delivered personally or
telecopied, or if mailed, two days after the date of mailing, or if by next-day delivery service, on the business
day following delivery thereto:
(a)
If to OFI, to:
OppenheimerFunds, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Executive Vice President and General Counsel
Telecopier: 212-321-1159
(b) If to Tremont, to:
Tremont Partners, Inc.
Rye Corporate Center
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, Xxx Xxxx 00000
Attention: ____________
------------
Telecopier: ____________
15. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of New York applicable to agreements
made and to be performed entirely within the State of New York (without regard to any conflicts of law principles
thereof). Any question of interpretation of any term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the Investment Company Act shall be resolved by reference to such
term or provision of the Investment Company Act and to interpretations thereof, if any, by the United States
courts or, in the absence of any controlling decision of any such court, by rules, regulations or orders of the
Commission issued pursuant to the Investment Company Act. In addition, where the effect of a requirement of the
Investment Company Act reflected in any provision of this Agreement is revised by rule, regulation or order of
the Commission, such provision shall be deemed to incorporate the effect of such rule, regulation or order.
16. DEFINITIONS.
The terms and provisions of the Agreement shall be interpreted and defined in a manner
consistent with the terms and provisions of the Investment Company Act and the rules thereunder.
OPPENHEIMERFUNDS, INC.
By: ______________________
Name:
Title:
TREMONT PARTNERS, INC.
By: ______________________
Name:
Title:
The provisions of Section 9 are hereby agreed to and accepted.
XXXXXXXXXXX TREMONT MARKET NEUTRAL FUND, LLC
By: ______________________
Name:
Title: