INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT, made as of the _____ day of ________________, by and between OPPENHEIMERFUNDS, INC., a Colorado
corporation ("OFI"), and TREMONT PARTNERS, INC., a Connecticut corporation ("Tremont").
RECITAL
WHEREAS, OFI TREMONT MARKET NEUTRAL HEDGE FUND, a Massachusetts business trust (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
____________________ (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 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. Xxxx
Senior Vice President and General Counsel
Telecopier: 212-323- 4070
(b) If to Tremont, to:
Tremont Partners, Inc.
Rye Corporate Center
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Senior Vice President, Secretary & Treasurer
Telecopier: 914.921.3499
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: Xxxxx X. Xxxxxx
Title: Senior Vice President & Treasurer
TREMONT PARTNERS, INC.
By: ______________________
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President, Secretary & Treasurer
The provisions of Section 9 are hereby agreed to and accepted.
OFI TREMONT MARKET NEUTRAL HEDGE FUND
By: ______________________
Name: Xxxxxxxxx X. Xxxx
Title: Assistant Secretary
