Exhibit 2(g)(2)
FORM OF
SUB-ADVISORY INVESTMENT MANAGEMENT AGREEMENT
This Sub-Advisory Investment Management Agreement (this "Agreement") is entered
into as of November___, 2007 by and between Magnetar Financial LLC, a limited
liability company duly organized and existing under the laws of the State of
Delaware (the "Investment Manager"), Post Oak Energy Advisors, LLC, a limited
liability company duly organized and existing under the laws of the State of
Delaware (the "Subadviser"), and Magnetar Spectrum Fund, a statutory trust duly
organized and existing under the laws of the State of Delaware (the "Fund").
RECITALS:
The Fund is a closed-end management investment company registered under
the Investment Company Act of 1940 (the "1940 Act");
The Investment Manager is engaged principally in providing management and
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
The Investment Manager has entered into an Investment Management
Agreement, dated ________ ___, 2007 with the Fund (such agreement and any
successor agreement thereto, the "Investment Management Agreement"), pursuant to
which the Investment Manager acts as investment adviser to the Fund and provides
certain investment advisory and other services with respect to the Fund;
The Investment Management Agreement contemplates that the Investment
Manager may appoint a subadviser to perform certain services relating to the
management of the Fund; and
The Investment Manager, with the approval of the Fund's Board of Trustees,
including a majority of the Trustees who are not "interested persons," as
defined under the 1940 Act, desires to retain the Subadviser to provide
investment advisory services to the Investment Manager in connection with the
Investment Manager's management of the Fund, and the Subadviser is willing to
render such investment advisory services;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set out in this Agreement, the Investment Manager, the Subadviser and the Fund
agree as follows:
1. Appointment of Subadviser
The Investment Manager appoints and retains the Subadviser to act as the
Investment Manager's adviser with respect to a portion of the Fund's assets,
which portion will be mutually determined by the Investment Manager and the
Subadviser (and is referred to herein as the "Agreed Portfolio"), and Subadviser
accepts such engagement to provide technical due diligence on specific assets
related to the natural resource industry and to provide investment
recommendations with respect to the natural resource assets which Subadviser so
diligences and to provide such other recommendations, advice and assistance to
the Investment Manager, as are mutually agreed upon by Investment Manager and
Subadviser from time to time, in each case, consistent with the Fund's
investment objective, policies and limitation specified in the Fund's private
placement memorandum (the "Private Placement Memorandum") filed with the
Securities and Exchange Commission (the "SEC") as part of the Fund's
registration statement on Form N-2. The Subadviser accepts such appointment and
agrees during such period, at its own expense, to render, or arrange for the
rendering of, such investment advisory services and to assume the obligations
set out in this Agreement for the compensation provided for in this Agreement.
The Subadviser for all purposes in this Agreement will be deemed to be an
independent contractor and no partnership or joint venture relationship shall
arise by reason of the obligations in this Agreement.
2. Duties of the Subadviser
(a) Sub-Advisory Services.
(1) Subject to the general supervision of the Board of Trustees
and the Investment Manager, during the Term (as defined
below), the Subadviser shall provide the investment advisory
services with respect to the Agreed Portfolio as are
reasonably requested to be performed by the Investment Manager
and that are necessary for the Investment Manager's operation
of the Fund. The Subadviser will provide the Investment
Manager with recommendations, advice and assistance in
connection with the Investment Adviser's selection of
portfolio investments for the Fund.
(2) Prior to providing investment advisory services, Subadviser
will register as an investment adviser under the Advisers Act
and thereafter will maintain such registration with the SEC
during the remainder of the Term. Subadviser shall promptly
notify Investment Manager (a) if Subadviser fails to be
registered under the Advisers Act at any time after it becomes
so registered, (b) if Subadviser shall have been served or
otherwise have notice of any action, suit, proceeding, inquiry
or investigation, at law or equity, before any court, public
board or body, involving the affairs of the Fund, and (c) of
any other occurrence that reasonably could have a material
adverse impact on the ability of the Subadviser to provide the
services provided for under this Agreement.
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(3) Subadviser shall provide Investment Manager and Fund with
written policies and procedures, or summaries thereof (the
"Compliance Polices") that are reasonably designed to prevent
violations of the federal securities laws as defined in Rule
38a-1 of the 1940 Act and as required by Rule 204(4)-7 of the
Adviser Act. The Subadviser will comply in all material
respects with any reasonable procedures provided from time to
time to the Subadviser by the Investment Manager. The
Subadviser will notify the Fund as soon as reasonably
practicable upon detection of any material breach of such
procedures. In this connection, the Subadviser shall provide
reasonable assistance to the Fund's Chief Compliance Officer
(the "CCO") in respect of the CCO's initial and periodic
reviews of those aspects of the Subadviser's compliance
program relevant to the Fund and provide prompt reporting to
the CCO of material compliance matters relevant thereto (as
the same are defined for purposes of Rule 38a-1 of the 1940
Act).
(4) The Subadviser will maintain a written code of ethics (the
"Code of Ethics") pursuant to Rule 17j-1 under the 1940 Act, a
copy of which will be provided to the Fund, and at such time
will institute procedures reasonably necessary to prevent
Access Persons (as defined in Rule 17j-1) from violating its
Code of Ethics. The Subadviser will follow such Code of Ethics
in performing its services under this Agreement.
(5) Subadviser shall not consult with any other subadviser engaged
by the Investment Manager with respect to transactions in
securities or other assets concerning the Fund or another fund
advised by the Investment Manager unless such consultation is
prohibited under the 1940 Act.
3. Duties of the Investment Manager.
The Investment Manager shall continue to have responsibility for all
services to be provided to the Fund pursuant to Investment Management Agreement
and shall supervise and oversee the Subadviser's performance of its duties under
this Agreement; provided however, that in connection with providing sub-advisory
services, nothing herein shall be construed to relieve the Subadviser of
responsibility of compliance with all federal and state laws and regulations
applicable to Subadviser, as each is amended from time to time.
4. Information and Reports
(a) The Subadviser agrees to make available to the Investment
Manager or the Board of Trustees any reports and information related to
the Subadviser's duties under the Agreement as are customary and that the
Board of Trustees may reasonably request.
(b) The Subadviser will notify the Investment Manager and the Fund
of any additional, removed or substituted managing member of the
Subadviser within a reasonable time of such addition, removal or
substitution.
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(c) The Investment Manager agrees to provide Subadviser with copies
of the Private Placement Memorandum, the Agreement and Declaration of
Trust of the Fund, the Fund's By-Laws and copies of any amendments of or
supplements to the foregoing.
5. Standard of Care; Indemnification
(a) Standard of Care. The Subadviser will exercise its best judgment, act
in good faith, use reasonable care and act in a manner consistent with
applicable federal and state laws and regulations in rendering the services it
agrees to provide under this Agreement. The Subadviser will not be liable to the
Investment Manager and the Fund for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in
providing sub-advisory services, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties under this Agreement (such conduct,
"Disabling Conduct").
(b) Indemnification. The Investment Manager will only indemnify the
Subadviser for activities that do not constitute Disabling Conduct but only to
the extent the Investment Manager itself is indemnified by the Fund under the
Investment Management Agreement.
6. Delegation
Subject to the requirements of the 1940 Act and the approval of the
Investment Manager and the Board of Trustees of the Fund, the Subadviser may at
its own costs and expense enter into contracts with one or more parties,
including without limitation affiliates of the Subadviser, to provide any of the
services described herein on such terms as the Subadviser will determine
necessary, desirable or appropriate, provided that in each case the Subadviser
shall supervise the activities of such parties and further provided that such
contracts impose all conditions to which the Subadviser is subject to hereunder
and that such contracts are entered into in accordance with and meet all the
applicable requirements of the 1940 Act.
7. Compensation
For the services rendered and the expenses assumed by the Subadviser under
this Agreement, the Fund will pay to the Subadviser at the end of each calendar
quarter a fee of $250,000. The sub-advisory fee for the period from the
Effective Date (defined in Section 11(a)) of this Agreement to the end of the
calendar quarter during which the Effective Date occurs will be prorated
according to the proportion that such period bears to the full quarterly period.
Upon any termination of this Agreement before the end of a calendar quarter, the
sub-advisory fee for such part of that quarter will be prorated according to the
proportion that such period bears to the full quarterly period and will be
payable upon the date of termination of this Agreement.
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8. Expenses
Subadviser shall bear all of its separate expenses incurred in performing
its duties under this Agreement, which shall be paid out of its compensation set
out in Section 7 above, and include, but are not limited to, providing the staff
and personnel necessary to perform its obligations under this Agreement, assume
and pay or cause to be paid all expenses incurred in connection with the
maintenance of such staff and personnel, and, at its own expense, provide the
office space, facilities, equipment and necessary personnel that it is obligated
to provide under this Agreement.
9. Exclusivity and Non-Compete
The Investment Manager and the Fund understand that the Subadviser and its
affiliates (in accordance with Section 6 of this Agreement) may now act, could
continue to act and may act in the future as investment manager, adviser,
general partner or managing member to fiduciary and other managed accounts, and
as an investment manager or adviser to other investment companies, including,
but not limited to, offshore entities or private accounts. The Investment
Manager and the Fund understand that the persons employed, directly or
indirectly, by the Subadviser to assist in the performance of the Subadviser's
duties under this Agreement may not devote their full time to such service. This
Agreement will not in any way limit or restrict the Subadviser or any of its
affiliates, principals, officers, employees, or agents from buying, selling or
trading any securities or other investment instruments for its or their own
account.
10. Custody
Nothing in this Agreement will require the Subadviser to take or receive
physical possession of cash, securities, or other investments of the Fund.
11. Term of Agreement; Termination of Agreement; Amendment of Agreement
(a) Term. This Agreement will become effective upon the acceptance into
the Fund of investment moneys (the "Effective Date"), and, unless terminated in
accordance with its terms, will continue for an initial two-year term and after
that initial two-year term so long as such continuance is specifically approved
at least annually as required by the 0000 Xxx. The period from the Effective
Date until this Agreement terminates by its terms or is terminated in accordance
with Section 11(b) is referred to herein as the "Term." Notwithstanding the
foregoing, the Investment Manager's indemnification obligations and obligation
to compensate Subadviser for fees and expenses that accrued prior to such
termination shall survive such termination.
(b) Termination. This Agreement may be terminated, without penalty, (i) by
the Board of Trustees or by vote of holders of a majority of the outstanding
shares of the Fund upon sixty (60) days' prior written notice to the Investment
Manager and the Subadviser, (ii) by the Investment
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Manager upon sixty (60) days' prior written notice to the Subadviser, or (iii)
by the Subadviser upon sixty (60) days' prior written notice to the Adviser.
This Agreement also will terminate automatically in the event of its
"assignment," as defined in the 1940 Act and the rules under the 1940 Act,
except that to the extent consistent with the Advisers Act and the 1940 Act,
without the notice to or consent of the Fund, the Investment Manager may be
reconstituted or reorganized into any other form of business entity.
(c) Amendment. This Agreement may be amended in writing by mutual consent
and in conformity with the requirements of the 1940 Act and the rules under the
1940 Act.
12. Cooperation with Regulatory Authorities or Other Actions
The parties to this Agreement each agree to cooperate in a reasonable
manner with each other in the event that any of them should become involved in a
legal, administrative, judicial or regulatory action, claim, or suit as a result
of performing its obligations under this Agreement; provided, the party that
requests cooperation from another party shall reimburse such second party for
all costs, fees and expenses incurred by such second party in cooperating with
the requesting party and shall, in accordance with Section 5, indemnify, defend
and hold harmless the second party and its related parties from all claims,
damages, costs and expenses (including reasonable legal fees and court
disbursements) that would not have been incurred but for cooperating with the
requesting party.
13. Records
(a) Maintenance of Records. The Subadviser undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the 1940
Act and Rule 204-2 under the Advisers Act, all records relating to the Fund's
investments that are required to be maintained by Subadviser with respect to the
Subadviser's responsibilities under this Agreement (the "Books and Records").
(b) Ownership of Records. The Subadviser agrees that the Books and Records
are the Fund's property and agrees to surrender promptly to the Fund the Books
and Records upon the request of the Fund. The Subadviser may, however, retain
copies of the records at its own cost. The Books and Records will be made
available, within ten (10) business days of a written request, to the Fund's
accountants or auditors during regular business hours at the Investment
Manager's offices. The Fund, the Investment Manager or each of their authorized
representatives will have the right to copy any records in the Subadviser's
possession that pertain to the Fund. These books, records, information, or
reports will be made available to properly authorized government representatives
consistent with state and federal law and/or regulations. In the event of the
termination of this Agreement, the Books and Records will be transferred at the
Fund's request to any successor Subadviser and the Investment Manager, provided,
however, that the Subadviser may also retain a copy for its records at its own
cost. The Subadviser shall maintain and enforce adequate security procedures
with respect to all materials, records,
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documents and data relating to its responsibilities under this Agreement. The
Subadviser agrees that the policies and procedures it has established for
providing sub-advisory services will be made available for inspection by the
Fund, Investment Manager or each of their authorized representatives upon
reasonable written request within ten (10) business days. For purposes of
clarification, while the Books and Records shall be the property of the Fund,
the performance record of Subadviser shall be the sole property of Subadviser.
14. Insurance
So long as available on commercially reasonable terms, Subadviser shall
maintain during the Term, with an insurer acceptable to the Investment Manager,
a blanket bond and professional liability and errors and omissions insurance in
an amount or amounts deemed by the Subadviser in its sole discretion to be
sufficient to meet its obligations to its clients, including the Fund.
15. Survival
All representations and warranties made by the Subadviser and Investment
Manager in this Agreement will survive for the duration of this Agreement and
these two parties to this Agreement will notify each other in writing
immediately upon becoming aware, but in no event later than five (5) days after
becoming aware, that any of the foregoing representations and warranties are no
longer true.
16. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule, or otherwise, the remainder of this Agreement will not
be affected as a result. As used in this Agreement, terms will have the same
meaning as such terms have in the 1940 Act. In the event that the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision may be deemed to
incorporate the effect of such rule, regulation or order. This Agreement may be
signed in counterpart.
17. Definitions
The terms "assignment" and "interested person," when used in this
Agreement, will have the respective meanings specified in Section 2(a) of the
1940 Act and the rules under the 1940 Act. The term "majority of the outstanding
shares" as used in this Agreement means the lesser of (a) sixty-seven percent
(67%) or more of the voting shares present at a meeting if more than fifty
percent (50%) of these voting shares are present or represented by proxy, or (b)
more than fifty percent (50%) of the outstanding voting shares.
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18. Limitation of Liability of the Fund and the Shareholders
The name "Magnetar Spectrum Fund" is the designation of the Fund for the
time being under the Agreement and Declaration of Trust and all persons dealing
with the Fund must look solely to the property of the Fund for the enforcement
of any claims against the Fund, as none of the Trustees, officers, agents or
shareholders assume any personal liability for obligations entered into on
behalf of the Fund.
19. Miscellaneous
(a) The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions in the
Agreement or otherwise affect their construction of effect. This Agreement may
be executed in one or more counterparts, each of which will be deemed an
original, and all of such counterparts together will constitute one and the same
instrument.
(b) Any question or interpretation of any term or provision in this
Agreement having a counterpart in or otherwise derived from a term or provision
of the 1940 Act will be resolved by reference to such term or provision in the
1940 Act and to interpretations thereof, if any, by the United States Courts or
in the absence of controlling decision in any such court, by rules, regulation
or orders of the SEC issued pursuant to the 1940 Act. In addition, where the
effect of a requirement of the 1940 Act reflect in any provision of this
Agreement is modified or interpreted by applicable order or orders of the SEC or
any rules or regulations adopted by, or interpretative releases of, the SEC
thereunder, such provision will be deemed to incorporate the effect of such
order, rule, regulation or interpretative release.
(c) This Agreement will be governed by, construed under and interpreted
and enforced in accordance with the laws of the state of Delaware, without
regard to choice of law or conflicts of law principals, provided that nothing in
this Agreement will be construed in a manner inconsistent with the 1940 Act, or
in a manner that would cause the Trust to fail to comply with the requirements
of Subchapter M of the Code.
IN WITNESS WHEREOF, the parties to this Agreement have executed and
delivered this Agreement as of the date first above written.
POST OAK ENERGY ADVISORS, LLC MAGNETAR FINANCIAL LLC
By: By:
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Name: Name:
Title: Title:
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MAGNETAR SPECTRUM FUND
By:
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Name:
Title:
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