INTERIM INVESTMENT SUB-ADVISORY AGREEMENT
INTERIM INVESTMENT SUB-ADVISORY AGREEMENT made this 30th day of
March, 2018, by and among ELKHORN ETF TRUST, a Massachusetts
business trust (the "Trust"), INNOVATOR CAPITAL MANAGEMENT, LLC, a
Delaware limited liability company (the "Adviser"), and PENSERRA
CAPITAL MANAGEMENT LLC, a Delaware limited liability company (the
"Sub-Adviser").
WHEREAS, the Trust is registered under the Investment Company
Act of 1940, as amended ("1940 Act"), as an open-end management
investment company;
WHEREAS, the Trust is authorized to issue shares in separate
series, with each such series representing interests in a
separate portfolio of securities and other assets;
WHEREAS, the Trust intends to offer shares in series as set
forth on Schedule A attached hereto and any other series as to
which this Agreement may hereafter be made applicable and set
forth on Schedule A, which may be amended from time to time
(each such series being herein referred to as a "Fund," and
collectively as the "Funds");
WHEREAS, the Trust has retained the Adviser to serve as the
investment adviser for the Funds pursuant to an Interim
Investment Management Agreement between the Adviser and the
Trust (the "Interim Management Agreement") and desires to
continue to retain the Adviser to serve as the investment
adviser for the Funds pursuant to a definitive Investment
Management Agreement between the Adviser and the Trust;
WHEREAS, the Interim Management Agreement provides that the
Adviser may, subject to the approvals required under the 1940
Act and the rules thereunder, appoint a sub-adviser at its own
cost and expense for the purpose of furnishing certain services
required under the Interim Management Agreement;
WHEREAS, the Trust and the Adviser desire to appoint the Sub-
Adviser to furnish certain investment advisory and portfolio
management services for the Funds' investment portfolios; and
WHEREAS, the Trust and the Adviser desire to enter into this
agreement (the "Agreement") pursuant to Rule 15a-4 under the
1940 Act, under which the Sub-Adviser will furnish certain
investment advisory and portfolio management services for the
Funds upon the terms and conditions hereafter set forth:
W I T N E S S E T H:
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and among the parties hereto
as follows:
1. Appointment. The Trust and the Adviser hereby appoint the
Sub-Adviser to provide certain sub-investment advisory services
to each Fund for the period and on the terms set forth in this
Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation
herein provided. The Sub-Adviser shall, for all purposes herein
provided, be deemed an independent contractor and, unless
otherwise expressly provided or authorized, shall have no
authority to act for nor represent the Trust, the Funds or the
Adviser in any way, nor otherwise be deemed an agent of the
Trust, the Funds or the Adviser.
2. Services to Be Performed. Subject always to the supervision
of the Trust's Board of Trustees (the "Board of Trustees") and
the Adviser, the Sub-Adviser will act as sub-adviser for, and
manage on a discretionary basis the investment and reinvestment
of the assets of, each Fund, and furnish an investment program
in respect of, make investment decisions for, and place all
orders (either directly or through the Adviser) for the purchase
and sale of securities for each Fund's investment portfolio, all
on behalf of such Fund and as described in the Fund's currently
effective registration statement on Form N-1A as the same and
such investment policies applicable to the Sub-Adviser's portion
of the Fund's portfolio described therein may thereafter be
amended from time to time. In the performance of its duties,
the Sub-Adviser will (a) satisfy any applicable fiduciary duties
it may have to the Funds, (b) monitor the Funds' investments,
(c) comply with the provisions of the Trust's Declaration of
Trust and By-laws, as amended from time to time and communicated
by the Trust or the Adviser to the Sub-Adviser, and the stated
investment objectives, policies and restrictions of each Fund as
such objectives, policies and restrictions may subsequently be
changed by the Board of Trustees and communicated by the
applicable Fund or the Adviser to the Sub-Adviser in writing,
and (d) assist in the valuation of portfolio assets held by each
Fund as requested by the Adviser or the Fund. The Sub-Adviser
and the Adviser will each make its officers and employees
available to the other from time to time at reasonable times to
review the investment objectives, policies and restrictions of
each Fund applicable to the portion of the portfolio allocated
to the Sub-Adviser and to consult with each other regarding the
investment affairs of the Fund. The Trust or the Adviser has
provided the Sub-Adviser with current copies of the Trust's
Declaration of Trust and By-laws, each Fund's prospectus and
statement of additional information and any amendments thereto,
and any objectives, policies or limitations not appearing
therein as they may be relevant to the Sub-Adviser's performance
under this Agreement.
Unless otherwise provided by the Adviser, the Sub-Adviser
is authorized to select the brokers or dealers that will execute
the purchases and sales of a Fund's securities on behalf of the
Fund, and is directed to use its commercially reasonable efforts
to obtain best execution, which includes most favorable net
results and execution of a Fund's orders, taking into account
all appropriate factors, including price, dealer spread or
commission, size and difficulty of the transaction and research
or other services provided. Subject to approval by the Board of
Trustees and to the extent permitted by and in conformance with
applicable law (including Rule 17e-1 of the 1940 Act), the Sub-
Adviser may select brokers or dealers affiliated with the Sub-
Adviser. It is understood that the Sub-Adviser will not be
deemed to have acted unlawfully, or to have breached a fiduciary
duty to the Trust or a Fund, or be in breach of any obligation
owing to the Trust or a Fund under this Agreement, or otherwise,
solely by reason of its having caused a Fund to pay a member of
a securities exchange, a broker or a dealer a commission for
effecting a securities transaction for the Fund in excess of the
amount of commission another member of an exchange, broker or
dealer would have charged if the Sub-Adviser determined in good
faith that the commission paid was reasonable in relation to the
brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the
Sub-Adviser's overall responsibilities with respect to its
accounts, including the Funds, as to which it exercises
investment discretion.
In addition, the Sub-Adviser may, to the extent permitted
by applicable law, aggregate purchase and sale orders of
securities with similar orders being made simultaneously for
other accounts managed by the Sub-Adviser or its affiliates, if
in the Sub-Adviser's reasonable judgment such aggregation shall
result in an overall economic benefit to the applicable Fund,
taking into consideration the selling or purchase price,
brokerage commissions and other expenses. In the event that a
purchase or sale of an asset of a Fund occurs as part of any
aggregate sale or purchase orders, the objective of the Sub-
Adviser and any of its affiliates involved in such transaction
shall be to allocate the assets so purchased or sold, as well as
expenses incurred in the transaction, among the Fund and other
accounts in an equitable manner. Nevertheless, each Fund and
the Adviser acknowledge that under some circumstances, such
allocation may adversely affect the Fund with respect to the
price or size of the securities positions obtainable or salable.
Whenever a Fund and one or more other investment advisory
clients of the Sub-Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated
in a manner believed by the Sub-Adviser to be equitable to each,
although such allocation may result in a delay in one or more
client accounts being fully invested that would not occur if
such an allocation were not made. Moreover, it is possible that
due to differing investment objectives or for other reasons, the
Sub-Adviser and its affiliates may purchase securities of an
issuer for one client and at approximately the same time
recommend selling or sell the same or similar types of
securities for another client.
The Sub-Adviser will not arrange purchases or sales of
securities between a Fund and other accounts advised by the Sub-
Adviser or its affiliates unless (a) such purchases or sales are
in accordance with applicable law (including Rule 17a-7 of the
0000 Xxx) and the Fund's policies and procedures, (b) the Sub-
Adviser determines the purchase or sale is in the best interests
of the Fund, and (c) the Board of Trustees has approved these
types of transactions.
Each Fund may adopt policies and procedures that modify or
restrict the Sub-Adviser's authority regarding the execution of
such Fund's portfolio transactions provided herein. Such
policies and procedures and any amendments thereto will be
communicated by the Adviser to the Sub-Adviser. The Adviser
shall provide reasonable advance notice to the Sub-Adviser of
such policies and procedures and any amendments thereto.
The Sub-Adviser will communicate to the officers and
trustees of the Trust such information relating to transactions
for the Funds as they may reasonably request. In no instance
will portfolio securities be purchased by or sold to the
Adviser, the Sub-Adviser or any affiliated person of any of the
Trust, the Adviser, or the Sub-Adviser, except as may be
permitted under the 1940 Act.
The Sub-Adviser further agrees that it:
(a) will use the same degree of skill and care in
providing such services as it uses in providing services to
other fiduciary accounts for which it has investment
responsibilities;
(b) will conform in all material respects to all
applicable rules and regulations of the Securities and
Exchange Commission (the "Commission") and comply in all
material respects with all policies and procedures adopted
by the Board of Trustees for each Fund and communicated to
the Sub-Adviser and, in addition, will conduct its
activities under this Agreement in all material respects in
accordance with any applicable regulations of any
governmental authority pertaining to its investment
advisory activities;
(c) will report regularly to the Adviser and to the Board
of Trustees (generally on a quarterly basis) and will make
appropriate persons available for the purpose of reviewing
with representatives of the Adviser and the Board of
Trustees on a regular basis at reasonable times the
management of each Fund, including, without limitation,
review of the general investment strategies of the Fund
with respect to the portion of the Fund's portfolio
allocated to the Sub-Adviser, the performance of the Fund's
investment portfolio allocated to the Sub-Adviser in
relation to relevant standard industry indices and general
conditions affecting the marketplace and will provide
various other reports from time to time as reasonably
requested by the Adviser or the Board of Trustees; and
(d) will prepare and maintain such books and records with
respect to each Fund's securities and other transactions as
required under applicable law or as otherwise reasonably
agreed to by the parties and will prepare and furnish the
Adviser and the Board of Trustees such periodic and special
reports as the Adviser or the Board of Trustees may
reasonably request. The Sub-Adviser further agrees that
all records which it maintains for each Fund are the
property of such Fund and the Sub-Adviser will surrender
promptly to the Fund any such records upon the request of
the Adviser or such Fund (provided, however, that the Sub-
Adviser shall be permitted to retain copies thereof); and
shall be permitted to retain originals (with copies to the
applicable Fund) to the extent required under Rule 204-2 of
the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), or other applicable law.
3. Expenses. During the term of this Agreement, the Sub-
Adviser will pay all expenses incurred by it in connection with
its activities under this Agreement other than the cost of
securities and other assets (including brokerage commissions, if
any) purchased for the Funds.
4. Additional Sub-Advisers. Subject to obtaining the initial
and periodic approvals required under Section 15 of the 1940 Act
(after taking into effect any exemptive order, no-action
assurances or other relief upon which the respective Fund may
rely) and the approval of the Adviser, the Sub-Adviser may
retain one or more additional sub-advisers at the Sub-Adviser's
own cost and expense for the purpose of furnishing one or more
of the services described in Section 2 hereof with respect to a
Fund. In addition, the Adviser may adjust from time to time the
duties delegated to the Sub-Adviser, the portion of portfolio
assets of a Fund that the Sub-Adviser shall manage and the fees
to be paid to the Sub-Adviser in accordance with this Agreement,
subject to the approvals set forth in Section 15 of the 1940 Act
if required including after taking into account any exemptive
order, no-action assurances or other relief upon which the
respective Fund may rely. Retention of a sub-adviser hereunder
shall in no way reduce the responsibilities or obligations of
the Sub-Adviser under this Agreement and the Sub-Adviser shall
be responsible to the applicable Fund for all acts or omissions
of any sub-adviser in connection with the performance of the
Sub-Adviser's duties hereunder with respect to such Fund.
5. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full
compensation therefor, a sub-advisory fee (the "Sub-Advisory
Fee") equal to the annual rate of each Fund's average daily net
assets as set forth on Schedule A, subject to the following.
The compensation accrued hereunder will be held in an interest-
bearing escrow account with the Funds' custodian or another bank
(as defined in the 0000 Xxx) designated by the Trust. If a new
investment sub-advisory agreement (the "New Sub-Advisory
Agreement") with the Sub-Adviser on behalf of a Fund is approved
by the vote of a majority of the outstanding voting securities
of such Fund by the end of the 150-day term of this Agreement,
the amount in the escrow account applicable to such Fund
(including the interest earned) will be paid to the Sub-Adviser.
If a majority of the outstanding voting securities of a Fund
does not approve the New Sub-Advisory Agreement with the Sub-
Adviser on behalf of such Fund within the 150-day period, the
Sub-Adviser will be paid, out of the escrow account, the lesser
of: (i) any costs incurred by the Adviser in performing this
Agreement for that Fund (plus interest earned on that amount
while in escrow); or (ii) the total amount in the escrow account
for that Fund (plus interest earned).
For the month and year in which this Agreement becomes
effective, or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement
shall have been in effect during the month and year,
respectively.
6. Custodian. The assets subject to this Agreement shall
be held by the custodian of the Funds ("Custodian") or by a
central depository selected by the Custodian. In no event shall
the Sub-Adviser have the power or authority to take custody or
possession of any assets of the Funds. The Sub-Adviser is
authorized to give instructions to the current or any successor
Custodian with respect to all investment decisions regarding
such assets. The Sub-Adviser will promptly notify the Custodian
of all securities transactions for each Fund and will cooperate
with the Custodian in supplying all reasonable information
required by the Custodian. All transactions will be consummated
by payment or delivery to the Custodian of all cash or
securities due to or from the Funds. In the event that any cash
or securities are delivered to the Sub-Adviser, the Sub-Adviser
will promptly deliver the same over to the Custodian. The Sub-
Adviser will instruct all brokers executing orders on behalf of
the Funds to forward to the Custodian copies of all brokerage
confirmations promptly after execution of each transaction. The
Funds will not change the Custodian without giving the Sub-
Adviser reasonable prior notice of their intention to do so
together with the name of, and other relevant information with
respect to, the new Custodian.
7. Services to Others. The Trust and the Adviser acknowledge
that the Sub-Adviser now acts, or may in the future act, as an
investment adviser to other accounts and as investment adviser
or investment sub-adviser to one or more other investment
companies that are not series of the Trust. In addition, the
Trust and the Adviser acknowledge that the persons employed by
the Sub-Adviser to assist in the Sub-Adviser's duties under this
Agreement will not devote their full time to such efforts. It
is also agreed that the Sub-Adviser may use any supplemental
research obtained for the benefit of a Fund in providing
investment advice to its other investment advisory accounts and
for managing its own accounts.
8. Representations and Warranties of the Parties.
(a) The Sub-Adviser represents and warrants to the
Adviser as follows:
(i) The Sub-Adviser is a registered investment
adviser under the Advisers Act;
(ii) The Form ADV that the Sub-Adviser has previously
provided to the Adviser is a true and complete copy of
the form as currently filed with the Commission, and
the information contained therein is accurate and
complete in all material respects and does not omit to
state any material fact necessary in order to make the
statements made, in light of the circumstances under
which they are made, not misleading. The Sub-Adviser
will promptly provide the Adviser and the Trust with a
complete copy of all subsequent amendments to its Form
ADV; and
(iii) The Sub-Adviser agrees to maintain an
appropriate level of errors and omissions or
professional liability insurance coverage.
(b) The Adviser represents and warrants to the Sub-
Adviser that it is a registered investment adviser under
the Advisers Act.
9. Limitation of Liability. The Sub-Adviser shall not be
liable for, and the Trust and the Adviser will not take any
action against the Sub-Adviser to hold the Sub-Adviser liable
for, any error of judgment or mistake of law or for any loss
suffered by a Fund or the Adviser (including, without
limitation, by reason of the purchase, sale or retention of any
security) in connection with the performance of the Sub-
Adviser's duties under this Agreement, except for a loss
resulting from willful misfeasance, bad faith or gross
negligence on the part of the Sub-Adviser in the performance of
its duties under this Agreement, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
10. Term; Termination. With respect to each Fund, this
Agreement shall become effective on the date provided in
Schedule A for such Fund (the "Effective Date") and shall remain
in full force for (i) 150 days following the Effective Date or
(ii) until a vote of a majority of the outstanding voting
securities of such Fund shall approve the New Sub-Advisory
Agreement with the Sub-Adviser, or (iii) unless sooner
terminated as hereinafter provided, whichever occurs first.
This Agreement shall automatically terminate in the event
of its assignment, and may be terminated at any time without the
payment of any penalty by the Adviser or the Sub-Adviser upon
sixty (60) days' written notice to the other parties. This
Agreement may also be terminated on behalf of a Fund by action
of the Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund upon ten (10)
calendar days' written notice to the Sub-Adviser by the Fund
without payment of any penalty. This Agreement may be
terminated on behalf of a Fund at any time without the payment
of any penalty by the Adviser, the Board of Trustees, or by vote
of a majority of the outstanding voting securities of such Fund
in the event that it shall have been established by a court of
competent jurisdiction that the Sub-Adviser or any officer or
director of the Sub-Adviser has taken any action which results
in a breach of the material covenants of the Sub-Adviser set
forth herein. Termination of this Agreement shall not affect
the right of the Sub-Adviser to receive payments on any unpaid
balance of the compensation described in Section 5 earned prior
to such termination and for any additional period during which
the Sub-Adviser serves as such for the applicable Fund, subject
to applicable law. The terms "assignment" and "vote of a
majority of the outstanding voting securities" shall have the
same meanings set forth in the 1940 Act and the rules and
regulations thereunder.
11. Compliance Certification. From time to time the Sub-
Adviser shall provide such certifications with respect to Rule
38a-1 under the 1940 Act as are reasonably requested by a Fund
or the Adviser. In addition, the Sub-Adviser will, from time to
time, provide a written assessment of its compliance program in
conformity with current industry standards that is reasonably
acceptable to the Funds to enable the Funds to fulfill their
obligations under Rule 38a-1 under the 1940 Act.
12. Notice. Any notice under this Agreement shall be
sufficient in all respects if given in writing and delivered by
commercial courier providing proof of delivery and addressed as
follows or addressed to such other person or address as such
party may designate for receipt of such notice.
If to the Adviser or a Fund: If to the Sub-Adviser:
[ ] [ ]
13. Limitations on Liability. All parties hereto are expressly
put on notice of the Trust's Declaration of Trust and all
amendments thereto, a copy of which is on file with the
Secretary of the Commonwealth of Massachusetts, and the
limitation of shareholder and trustee liability contained
therein, a copy of which has been provided to the Sub-Adviser
prior to the date hereof. This Agreement is executed by the
Trust on behalf of the Funds by the Trust's officers in their
capacity as officers and not individually and is not binding
upon any of the Trust's trustees, officers or shareholders
individually but the obligations imposed upon the Trust or a
Fund by this Agreement are binding only upon the assets and
property of such Fund, and persons dealing with the Trust or a
Fund must look solely to the assets of that Fund for the
enforcement of any claims.
14. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement will be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors.
15. Applicable Law. This Agreement shall be construed in
accordance with applicable federal law and (except as to
Section 13 hereof, which shall be construed in accordance with
the laws of the Commonwealth of Massachusetts) the laws of the
State of Illinois.
16. Amendment, Etc. This Agreement may only be amended, or its
provisions modified or waived, in a writing signed by the party
against which such amendment, modification or waiver is sought
to be enforced.
17. Authority. Each party represents to the others that it is
duly authorized and fully empowered to execute, deliver and
perform its obligations under this Agreement. The Trust
represents that engagement of the Sub-Adviser has been duly
authorized by the Trust and is in accordance with the Trust's
Declaration of Trust and other governing documents of the Funds.
18. Severability. Each provision of this Agreement is intended
to be severable from the others so that if any provision or term
hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity of the
remaining provisions and terms hereof; provided, however, that
the provisions governing payment of the Sub-Advisory Fee
described in Section 5 are not severable.
19. Entire Agreement. This Agreement constitutes the sole and
entire agreement of the parties hereto with respect to the
subject matter expressly set forth herein.
IN WITNESS WHEREOF, the Trust, the Adviser and the Sub-Adviser
each have caused this Agreement to be executed as of the day and
year first above written.
ELKHORN ETF TRUST
By
Name: Xxx Xxxxxx
Title: Chief Executive Officer and President
ATTEST:
Name:___________________
Title:____________________
INNOVATOR CAPITAL MANAGEMENT, LLC
By
Name: Xxxxx Xxxx
Title: Chief Executive Officer
ATTEST:
Name:___________________
Title:____________________
PENSERRA CAPITAL MANAGEMENT LLC
By
Name: [ ]
Title: [ ]
ATTEST:
Name:___________________
Title:____________________
SCHEDULE A
FUNDS
SERIES: Elkhorn S&P High Quality Preferred ETF
ANNUAL RATE OF AVERAGE DAILY NET ASSETS:[ ]%
EFFECTIVE DATE: April 1, 2018
SERIES: Elkhorn Xxxx Low Vol/High Beta Tactical ETF
ANNUAL RATE OF AVERAGE DAILY NET ASSETS:[ ]%
EFFECTIVE DATE: April 1, 2018
