SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT (the "Agreement") made as of this 25th day of
February, 2015 by and between Xxxxxx Associates Inc., a California corporation
with its principal place of business at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxxxxxxx, XX 00000-0000 (the "Adviser"), and Penn Capital Management Company,
Inc., a Delaware corporation with its principal place of business at Xxxxx
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxxx, XX 00000 (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, pursuant to authority granted to the Adviser by the Board of
Trustees (the "Board") of THE KP FUNDS (the "Trust") on behalf of the series
set forth on Schedule A to this Agreement (the "Fund") and pursuant to the
provisions of the Investment Advisory Agreement dated as of December 18, 2013
between the Adviser and the Fund (the "Management Agreement"), the Adviser has
selected the Sub-Adviser to act as sub-investment adviser of the Fund and to
provide certain related services, as more fully set forth below, and to perform
such services under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Adviser and the Sub-Adviser do hereby agree as follows:
1. THE SUB-ADVISER'S SERVICES.
(a) DISCRETIONARY INVESTMENT MANAGEMENT SERVICES. The Sub-Adviser
shall act as sub-investment adviser with respect to the Fund. In such capacity,
the Sub-Adviser shall, subject to the supervision of the Adviser and the Board,
regularly provide the Fund with investment research, advice and supervision and
shall furnish continuously an investment program for such Fund assets as may be
allocated by the Adviser to the Sub-Adviser (the "Assets"), consistent with the
investment objectives and policies of the Fund and any investment guidelines
established and modified from time to time by the Adviser (-)and communicated in
writing to the Sub-Adviser. The Sub-Adviser shall determine, from time to time,
what investments shall be purchased for the Fund and what such securities shall
be held or sold by the Fund, subject always to the provisions of the Trust's
Agreement and Declaration of Trust, By-Laws and its registration statement on
Form NIA (the "Registration Statement") under the Investment Company Act of
1940, as amended (the "1940 Act"), and under the Securities Act of 1933, as
amended (the "1933 Act"), covering Fund shares, as filed with the Securities and
Exchange Commission (the "Commission"), and to the investment objectives,
policies and restrictions of the Fund, as each of the same shall be from time to
time in effect, and to any investment guidelines established by the Adviser as
referred to above and provided to the Sub-Adviser in writing. To carry out such
obligations, the Sub-Adviser shall exercise full discretion and act for the Fund
in the same manner and with the same force and effect as the Fund itself
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might or could do with respect to purchases, sales or other transactions, as
well as with respect to all other such things necessary or incidental to the
furtherance or conduct of such purchases, sales or other transactions.
Notwithstanding the foregoing, the Sub-Adviser shall, upon written instructions
from the Adviser, effect such portfolio transactions for the Fund as the
Adviser may from time to time direct; provided however, that the Sub-Adviser
shall not be responsible for any such portfolio transactions effected upon
written instructions from the Adviser. No reference in this Agreement to the
Sub-Adviser having full discretionary authority over the Fund's investments
shall in any way limit the right of the Adviser, in its sole discretion, to
establish or revise policies in connection with the management of the Fund's
assets or to otherwise exercise its right to control the overall management of
the Fund's assets: The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed exclusive, and the
Sub-Adviser shall be free to render similar or different services to others so
long as its ability to render the services provided for in this Agreement shall
not be impaired thereby.
(b) COMPLIANCE. The Sub-Adviser agrees to comply with the
requirements of the 1940 Act, the Investment Advisers Act of 1940, as amended
(the "Advisers Act"), the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Commodity Exchange Act and the respective rules
and regulations thereunder, as applicable, as well as with all other applicable
federal and state laws, rules, regulations and case law that relate to the
services and relationships described hereunder and to the conduct of its
business as a registered investment adviser. With respect to the Fund Assets as
defined in Section 1(a) herein, the Sub-Adviser also agrees to comply with the
objectives, policies and restrictions set forth in the Registration Statement,
as amended or supplemented, of the Fund, and with any policies, guidelines,
instructions and procedures approved by the Board or the Adviser and provided
to the Sub-Adviser. In selecting the Fund's portfolio securities and performing
the Sub-Adviser's obligations hereunder, the Sub-Adviser shall cause the Assets
to comply with the diversification and source of income requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company. The Sub-Adviser shall maintain
compliance procedures that it reasonably believes are adequate to ensure the
compliance with the foregoing. No supervisory activity undertaken by the
Adviser shall limit the Sub-Adviser's full responsibility for any of the
foregoing. The Adviser acknowledges that the Sub-Adviser's responsibilities arc
limited to those related to the management of the Assets, and that the
Sub-Adviser is not responsible for compliance, qualification or other matters
related to (1) those portions of Assets or portfolio transactions of Assets
that the Adviser may from time to time direct the Sub-Adviser referenced in
Section 1(a); and (2) those portions of the Fund which are not Assets and as
such are not subject to this Agreement.
(c) PROXY VOTING. Pursuant to Board authority, the Adviser has the
authority to determine how proxies with respect to securities that are held by
the Fund shall be voted, and the Adviser may delegate the authority and
responsibility to vote proxies for
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the Fund's securities to the Sub-Adviser. So long as proxy voting authority for
the Fund has been delegated to the Sub-Adviser, the Adviser shall provide such
assistance to the Sub-Adviser with respect to the voting of proxies for the
Fund as the Sub-Adviser may from time to time reasonably request, and the
Adviser shall promptly forward to the Sub-Adviser any information or documents
necessary for the Sub-Adviser to exercise its proxy voting responsibilities.
The Sub-Adviser shall carry out such responsibility in accordance with any
instructions that the Board or the Adviser shall provide from time to time, and
at all times in a manner consistent with Rule 206(4)-6 under the Advisers Act
and its fiduciary responsibilities to the Trust. The Sub-Adviser shall provide
the Adviser with a copy of the Sub-Adviser's written proxy voting policies and
procedures, and as such proxy voting policies and procedures may be amended
from time to time. The Sub-Adviser shall provide periodic reports and keep such
records relating to proxy voting as the Adviser and the Board may reasonably
request Or as may be necessary for the Fund to comply with the 1940 Act and
other applicable law. Any such delegation of proxy voting responsibility to the
Sub-Adviser may be revoked or modified by the Board or the Adviser at any time
upon written notice.
Unless and until otherwise directed by the Adviser or the Board the Sub-Adviser
shall be responsible for voting proxies relating to the securities that
comprise the Assets and exercising all other applicable rights of the Fund as a
security holder in connection with corporate actions or other transactions
relating to the Assets. The Sub-Adviser is authorized to instruct the Fund's
custodian and/or broker(s) to forward promptly to the Sub-Adviser or designated
service provider copies of all proxies and shareholder communications relating
to securities held in the Fund's portfolio which comprise the Assets (other
than materials relating to legal proceedings against the Fund). The Sub-Adviser
may also instruct the Fund's custodian and/or broker(s) to provide reports of
holdings in the portfolio of the Fund. The Sub-Adviser has the authority to
engage a service provider to assist with administrative functions related to
voting proxies relating to the Assets. The Trust shall direct the Fund's
custodian and/or broker(s) to provide any assistance requested by the
Sub-Adviser in facilitating the use of a service provider. In no event shall
the Sub-Adviser have any responsibility to vote proxies that arc not received
on a timely basis. The Trust acknowledges that the Sub-Adviser, consistent with
the Sub-Adviser's written proxy voting policies and procedures, may refrain
from voting a proxy if, in the Sub-Adviser's discretion, refraining from voting
would be in the best interests of the Fund and its Shareholders.
(d) RECORDKEEPING. The Sub-Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the Fund,
except as otherwise provided herein or as may be necessary for the Sub-Adviser
to supply to the Adviser, the Trust or its Board the information required to be
supplied under this Agreement.
The Sub-Adviser shall maintain separate books and detailed records of
all matters pertaining to the Assets advised by the Sub-Adviser required by
Rule 31a- I under the
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1940 Act (other than those records being maintained by the Adviser, or any
administrator custodian or transfer agent appointed by the Fund) relating to
its responsibilities provided hereunder with respect to the Fund, and shall
preserve such records for the periods and in a manner prescribed therefore by
Rule 31a-2 under the 1940 Act (the (-)Fund Books and Records"). The Fund Books
and Records shall be available to the Adviser and the Board at any time upon
reasonable request and shall be delivered to the Trust in a form requested by
the Adviser, which may include an electronic format, upon the termination of
this Agreement and shall be available without delay during any day the Trust is
open for business.
(e) HOLDINGS INFORMATION AND PRICING, The Sub-Adviser shall provide
regular reports regarding the Fund's holdings relating to the Assets, and may,
on its own initiative, furnish the Adviser, the Trust and its Board from time
to time with whatever information the Sub-Adviser believes is appropriate for
this purpose. The Sub-Adviser agrees to notify the Adviser and the Board
promptly if the Sub-Adviser reasonably believes that the value of any security
comprising the Assets may not reflect fair value. The Sub-Adviser agrees to
provide upon reasonable request any pricing information of which the
Sub-Adviser is aware to the Adviser, Trust, its Board and/or any Fund pricing
agent to assist in the determination of the fair value of any of the Assets for
which market quotations are not readily available or as otherwise required in
accordance with the 1940 Act or the Fund valuation procedures for the purpose
of calculating the Trust's net asset value in accordance with procedures and
methods established by the Board.
(f) COOPERATION WITH AGENTS OF THE ADVISER AND THE TRUST. The
Sub-Adviser agrees to cooperate with and provide reasonable assistance to the
Adviser, the Trust and any Trust custodian or foreign sub-custodians, any Trust
pricing agents and all other agents and representatives of the Adviser and the
Trust with respect to such information regarding the Fund as such entities may
reasonably request from time to time in the performance of their obligations,
provide prompt responses to reasonable requests made by such persons and
establish appropriate interfaces with each so as to promote the efficient
exchange of information and compliance with applicable laws and regulations.
The Sub-Adviser shall make its officers and employees available to the Adviser
from time to time to review any current or proposed investment guidelines for
the Fund and to consult with the Adviser with respect to the Fund's investment
matters. The Sub-Adviser shall have no responsibility or obligation to initiate
or independently determine to participate in any class action on behalf of the
Fund or the Trust.
(g) CONSULTATION WITH OTHER SUB-ADVISERS. In performance of its
duties and obligations under this Agreement, the Sub-Adviser shall not consult
with any other sub-adviser to the Fund or a sub-adviser to a portfolio that is
under common control with the Fund concerning transactions for the Fund, except
as permitted by the policies and procedures of the Fund. The Sub-Adviser shall
not provide investment advice to any assets of the Fund other than the Assets
managed by the Sub-Adviser.
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2. CODE OF ETHICS. The Sub-Adviser has adopted a written code of
ethics that it reasonably believes complies with the requirements of Rule 17j-1
under the 1940 Act, which it has provided to the Adviser and the Trust. The
Sub-Adviser shall ensure that its Access Persons (as defined in the
Sub-Adviser's Code of Ethics) comply in all material respects with the
Sub-Adviser's Code of Ethics, as in effect from time to time. Upon request, the
Sub-Adviser shall provide the Trust with (i) a copy of the Sub-Adviser's
current Code of Ethics, as in effect from time to time, and (ii) a
certification that it has adopted procedures reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by the Sub-Adviser's
Code of Ethics. Annually, the Sub-Adviser shall furnish a written report, which
complies with the requirements of Rule 17j-1, concerning the Sub-Adviser's Code
of Ethics to the Adviser and the Trust's Board. The Sub-Adviser shall respond
to requests for information from the Adviser and the Trust as to violations of
the Code by Access Persons and the sanctions imposed by the Sub-Adviser. The
Sub-Adviser shall promptly notify the Adviser and the Trust of any material
violation of the Code, whether or not such violation relates to a security held
by any Fund.
3. INFORMATION AND REPORTING. The Sub-Adviser shall provide the
Adviser, the Trust, and their respective officers with such periodic reports
concerning the obligations the Sub-Adviser has assumed under this Agreement as
the Adviser and the Trust may from time to time reasonably request.
(a) NOTIFICATION OF BREACH OR SIGNIFICANT CHANGES / COMPLIANCE
REPORTS. The Sub-Adviser shall notify the Trust's Chief Compliance Officer and
Adviser as soon as reasonably practicable upon detection of (i) any material
failure to manage any Assets in accordance with the Fund's investment
objectives and policies, any investment guidelines established by the Adviser
as provided by Section 1(a) herein, or any applicable law; or (ii) any material
breach of any of the Fund's or the Adviser's policies, guidelines or procedures
that directly relate to management of the Assets or to the sub-advisory
services provided by the Sub-Adviser to the Fund hereunder. The Sub-Adviser
shall notify the Adviser as soon as possible of (i) any significant changes in
its investment strategy, asset allocation or other matters affecting its
management of the Assets; or (ii) any changes to the senior investment
management personnel primarily responsible for the investment or servicing of
the Assets, which include portfolio managers and relationship managers. In
addition, the Sub-Adviser shall provide, with respect to the Assets, a
quarterly report regarding compliance with the Fund's investment objectives and
policies, applicable law, including, but not limited to the 1940 Act and
Subchapter M of the Code, and the Fund's and the Adviser's policies, guidelines
or procedures as applicable to the Sub-Adviser's obligations under this
Agreement. The Sub-Adviser acknowledges and agrees that the Adviser may, in its
discretion, provide such quarterly compliance certifications to the Board. The
Sub-Adviser agrees to correct any such failure promptly and to take any action
that the Board and/or the Adviser may reasonably request in connection with any
such breach. Upon request, the Sub-Adviser shall also provide the officers of
the Trust with supporting certifications in connection with such certifications
of Fund financial statements and disclosure controls pursuant to the
Xxxxxxxx-Xxxxx Act. The Sub-Adviser will promptly notify the Trust in the event
(i) the Sub-Adviser is served
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or otherwise receives notice of any action, suit, proceeding, or investigation,
at law or in equity, before or by any court, public board, or regulatory body,
involving the Fund (excluding class action suits in which a Fund is a member of
the plaintiff class by reason of the Fund's ownership of shares in the
defendant), or the material non-compliance by the Sub-Adviser with federal or
state securities laws or (ii) an actual change in control of the Sub-Adviser
resulting in an "assignment" (as defined in the 1940 Act) has occurred or is
otherwise proposed to occur.
(b) INSPECTION. Upon reasonable request, the Sub-Adviser agrees to
make its accounts, books and other records maintained and preserved by it as
required hereunder and premises (including the availability of the
Sub-Adviser's employees for interviews) for reasonable periodic compliance
audits by the Adviser or the Trust's officers, employees, accountants or
counsel. In this regard, the Trust and the Adviser acknowledge that the
Sub-Adviser shall have no obligation to make available proprietary information
or information unrelated to the services provided to the Fund, or any
information related to other clients of the Sub-Adviser, except to the extent
necessary for the Adviser to confirm the absence of any conflict of interest
and compliance with any laws, rules or regulations in the management of the
Fund.
(c) BOARD AND FILINGS INFORMATION. The Sub-Adviser will also provide
the Adviser and Trust with any information reasonably requested regarding its
management of the Assets required for any meeting of the Board, or for any
shareholder report, Form N-CSR, Form N-Q, Form N-PX, Form N-SAR, amended
registration statement, proxy statement, or prospectus supplement to be filed
by the Trust with the Commission. The Sub-Adviser will make its officers and
employees available to meet with the Board from time to time on due notice to
review its investment management services to the Fund in light of current and
prospective economic and market conditions and shall furnish to the Board such
information as may reasonably be necessary in order for the Board to evaluate
this Agreement or any proposed amendments thereto.
(d) TRANSACTION INFORMATION. The Sub-Adviser shall furnish to the
Adviser and the Trust such information concerning portfolio transactions as may
be necessary to enable the Adviser, Trust or their designated agents to perform
such compliance testing on the Fund and the Sub-Adviser's services as the
Adviser and the Trust may, in their sole discretion, determine to be
appropriate. The provision of such information by the Sub-Adviser to the
Adviser, Trust or their designated agents in no way relieves the Sub-Adviser of
its own responsibilities under this Agreement.
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4. BROKERAGE.
(a) PRINCIPAL TRANSACTIONS. In connection with purchases or sales of
securities for the account of a Fund, neither the Sub-Adviser nor any of its
directors, officers or employees will act as a principal or agent or receive any
commission except as permitted by the 1940 Act.
(b) PLACEMENT OF ORDERS. The Sub-Adviser shall arrange for the
placing of all orders for the purchase and sale of securities for a Fund's
account with brokers or dealers selected by the Sub-Adviser. In the selection
of such brokers or dealers and the placing of such orders, subject to the other
provisions of this paragraph, the Sub-Adviser is directed at all times to seek
for a Fund the best execution available under the circumstances, taking into
account factors such as price, size of order and type of transaction,
difficulty of execution, the nature of the market for the security, the timing
of the transaction taking into account market prices and trends, the scope and
quality of brokerage services provided, and the reputation, experience and
financial stability of the broker or dealer involved, and the quality of
services rendered by the broker or dealer in other transactions. It is expected
that the Sub-Adviser will seek competitive commission rates generally although
it is understood that the Sub-Adviser will not necessarily pay the lowest
commission rate available on each transaction. It is also understood that it
may he desirable for the Fund that the Sub-Adviser have access to brokerage and
research services provided by brokers who may execute brokerage transactions at
a higher cost to the Fund than may result when allocating brokerage to other
brokers, consistent with section 28(e) of the 1934 Act and any Commission staff
interpretations thereof. Therefore, the Sub-Adviser is authorized. to place
orders for the purchase and sale of securities for the Fund with such brokers
if the Sub-Adviser determines, in good faith, that such amount of commissions
is reasonable in relation to the value of such brokerage or research services
provided in terms of a particular Fund transaction or the Sub-Adviser's overall
responsibilities to the Fund and its other clients, and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long-term. This practice is subject to review by the Adviser
and the Board from time to time with respect to the extent and continuation of
this practice. It is understood that the services provided by such brokers may
be useful to the Sub-Adviser in connection with its or its affiliates' services
to other clients.
(c) AGGREGATED TRANSACTIONS. On occasions when the Sub-Adviser deems
the purchase or sale of a security to be in the best interest of a Fund as well
as other clients of the Sub-Adviser, the Sub-Adviser may, to the extent
permitted by applicable law and regulations, aggregate the order for securities
to be sold or purchased. In such event, the Sub-Adviser will allocate
securities or futures contracts so purchased or sold, as well as the expenses
incurred in the transaction, in the manner the Sub-Adviser reasonably considers
to be equitable and consistent with its fiduciary obligations to a Fund and to
such other clients under the circumstances.
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(d) AFFILIATED BROKERS. The Sub-Adviser or any of its affiliates may
act as broker in connection with the purchase or sale of securities or other
investments for a Fund, subject to: (a) the requirement that the Sub-Adviser
seek to obtain best execution and price within the policy guidelines determined
by the Board and set forth in a Fund's current Registration Statement; (b) the
provisions of the 1940 Act; (c) the provisions of the Advisers Act; (d) the
provisions of the 1934 Act; and (e) other provisions of applicable law. These
brokerage services are not within the scope of the duties of the Sub-Adviser
under this Agreement. Subject to the requirements of applicable law and any
procedures adopted by the Board, the Sub-Adviser or its affiliates may receive
brokerage commissions, fees or other remuneration from a Fund for these
services in addition to the Sub-Adviser's fees for services under this
Agreement.
5. CUSTODY. Nothing in this Agreement shall permit the Sub-Adviser to
take or receive physical possession of cash, securities or other investments of
a Fund.
6. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser will bear its
own costs of providing services hereunder. Other than as herein specifically
indicated, the Sub-Adviser shall not be responsible for a Fund's or the
Adviser's expenses, including brokerage and other expenses incurred in placing
orders for the purchase and sale of securities and other investment
instruments.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) PROPERLY REGISTERED. The Sub-Adviser is registered as an
investment adviser under the Advisers Act, and will remain so registered for the
duration of this Agreement. The Sub-Adviser is not prohibited by the Advisers
Act or the 1940 Act from performing the services contemplated by this Agreement,
and to the best knowledge of the Sub-Adviser, there is no proceeding or
investigation that is reasonably likely to result in the Sub-Adviser being
prohibited from performing the services contemplated by this Agreement. The
Sub-Adviser agrees to promptly notify the Trust of the occurrence of any event
that would disqualify the Sub-Adviser from serving as an investment adviser to
the Trust or a registered investment company. The Sub-Adviser is in compliance
in all material respects with all applicable federal and state law in connection
with its investment management operations.
(b) ADV DISCLOSURE. The Sub-Adviser has provided the Trust with a
copy of Part I of its Form ADV as most recently filed with the Commission and
its Part II as most recently updated and will, promptly after filing any
amendment to its Form ADV with the Commission or updating its Part II, furnish
a copy of such amendments or updates to the Trust. The information contained in
the Sub-Adviser's Form ADV 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 were made, not
misleading.
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(c) FUND DISCLOSURE DOCUMENTS. The Sub-Adviser has reviewed and will
in the future review and assist the Adviser in the preparation of the portions
of the following documents that pertain to the Sub-Adviser and the services
provided by the Sub-Adviser hereunder: the Registration Statement, summary
prospectus, prospectus, statement of additional information, periodic reports
to shareholders, reports and schedules filed with the Commission (including any
amendment, supplement or sticker to any of the foregoing) and advertising and
sales material relating to the Fund (collectively the "Disclosure Documents").
The Sub-Adviser represents and warrants that such portions of the Disclosure
Documents as reviewed and approved (such approval to be given in writing, which
shall include email) by the Sub-Adviser contain or will contain no untrue
statement of any material fact and do not and will not omit any statement of
material fact required to be stated therein or necessary to make the statements
therein not misleading. The Sub-Adviser agrees to respond to any request for
approval of Disclosure Documents on a prompt and timely basis.
(d) USE OF THE NAMES "KP" AND "XXXXXX." The Sub-Adviser has the right
to use the names "KP" and "Xxxxxx" in connection with its services to the Trust
and the Trust and the Adviser have the right to use the names "PENN" and/or
"PENN Capital Management" in connection with the management and operation of a
Fund. The Sub-Adviser is not aware of any threatened or existing actions,
claims, litigation or proceedings that would adversely affect or prejudice the
rights of the Sub-Adviser or the Trust to use the names PENN" and/or "PENN
Capital Management."
(e) INSURANCE. The Sub-Adviser maintains errors and omissions
insurance coverage in an appropriate amount and shall provide prior written
notice to the Trust (i) of any material changes in its insurance policies or
insurance coverage; or (ii) if any material claims will be made on its
insurance policies.Furthermore, the Sub-Adviser shall, upon reasonable request,
provide the Trust with any information it may reasonably require concerning the
amount of or scope of such insurance.
(f) NO DETRIMENTAL AGREEMENT. The Sub-Adviser represents and warrants
that it has no arrangement or understanding with any party, other than the
Trust, that would influence the decision of the Sub-Adviser with respect to its
selection of securities for a Fund, and that all selections shall be done in
accordance with what is in the best interest of the Fund.
(g) CONFLICTS. The Sub-Adviser shall act honestly. in good faith and
in the best interests of the Trust including requiring any of its personnel
with knowledge of Fund activities to place the interest of the Fund first,
ahead of their own interests, in all personal trading scenarios that may
involve (-)a conflict of interest with the Fund, consistent with its fiduciary
duties under applicable law.
(h) REPRESENTATIONS. The representations and warranties in this
Section 7 shall be deemed to be made on the date this Agreement is executed and
at the time of delivery
9
of the quarterly compliance report required by Section 3(a), whether or not
specifically referenced in such report.
8. SUB-ADVISER'S COMPENSATION. The Adviser shall cause the Fund to
pay the Sub-Adviser, as compensation for the Sub-Adviser's services hereunder,
a fee, determined as described in Schedule A that is attached hereto and made a
part hereof. Such fee shall be computed daily and paid not less than monthly in
arrears by the Fund.
The Sub-Adviser will be compensated based on the Assets, as defined in
Section 1(a) herein as that portion of Fund assets allocated to the Sub-Adviser
by the Adviser. The method for determining net assets of the Fund for purposes
hereof shall be the same as the method for determining net assets for purposes
of establishing the offering and redemption prices of Fund shares as described
in the Fund's prospectus. In the event of termination of this Agreement, the
fee provided in thiS Section shall be computed on the basis of the period
ending on the last business day on which this Agreement is in effect subject to
a pro rata adjustment based on the number of days elapsed in the current month
as a percentage of the total number of days in such month.
9. INDEPENDENT CONTRACTOR. IN the performance of its duties
hereunder, the Sub-Adviser is and shall be an independent contractor and,
unless otherwise expressly provided herein or otherwise authorized in writing,
shall have no authority to act for or represent the Fund, the Trust or the
Adviser in any way or otherwise be deemed to be an agent of the Fund, the Trust
or the Adviser. If any occasion should arise in which the Sub-Adviser gives any
advice to its clients concerning the shares of a Fund, the Sub-Adviser will act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
10. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically
terminate, without the payment of any penalty, (i) in the event of its
assignment (as defined in section 2(a)(4) of the 0000 Xxx) or (ii) in the event
of the termination of the Management Agreement; provided that such termination
shall not relieve the Adviser or the Sub-Adviser of any liability incurred
hereunder.
This Agreement may not be added to or changed orally and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act, when applicable.
11. DURATION AND TERMINATION.
This Agreement shall become effective as of the date executed and shall remain
in full force and effect continually thereafter, subject to renewal as provided
in Section 11(d) and unless terminated automatically as set forth in Section 10
hereof or until terminated as follows:
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(a) The Trust may cause this Agreement to terminate either (i) by
vote of its Board or (ii) with respect to the Fund, upon the affirmative vote
of a majority of the outstanding voting securities of the Fund; or
(b) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice delivered
or mailed by registered mail, postage prepaid, to the Sub-Adviser; or
(c) The Sub-Adviser may at any time terminate this Agreement by not
more than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Adviser; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Trustees, including a
majority vote of such Trustees who are not interested persons of the Trust, the
Adviser or the Sub-Adviser, at a meeting called for the purpose of voting on
such approval; or (ii) the vote of a majority of the outstanding voting
securities of the Fund; provided, however, that if the continuance of this
Agreement is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance of this Agreement as
provided herein, the Sub-Adviser may continue to serve hereunder as to the Fund
in a manner consistent with the 1940 Act and the rules and regulations
thereunder; and
(e) Termination of this Agreement pursuant to this Section shall be
without payment of any penalty.
In the event of termination of this Agreement for any reason, the Sub-Adviser
shall, immediately upon notice of termination or on such later date as may be
specified in such notice, cease all activity on behalf of the Fund and with
respect to any of its assets, except as expressly directed by the Adviser or as
otherwise required by any fiduciary duties of the Sub-Adviser under applicable
law. In addition, the Sub-Adviser shall deliver the Fund's Books and Records to
the Adviser by such means and in accordance with such schedule as the Adviser
shall direct and shall otherwise cooperate, as reasonably directed by the
Adviser, in the transition of portfolio asset management to any successor of
the Sub-Adviser, including the Adviser.
12. CERTAIN DEFINITIONS. FOR THE PURPOSES OF THIS Agreement:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940 Act,
subject, however, to such exemptions as may be granted by the Commission under
the 1940 Act or any interpretations of the Commission staff.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions as
may be
11
granted by the Commission under the 1940 Act or any interpretations of the
Commission staff.
13. LIABILITY AND INDEMNIFICATION.
(a) The Sub-Adviser's duties shall be confined to those expressly set
forth herein, with respect to the Assets. The Sub-Adviser shall not be liable
for any loss arising out of any portfolio investment or disposition hereunder
related to or resulting from market movement. Upon Sub-Adviser's approval of the
Disclosure Documents pursuant to .Section 7(c), the Sub-Adviser shall have
responsibility for the accuracy and completeness (and liability for the lack
thereof) of statements in the Fund's Disclosure Documents that are applicable or
relate to the Sub-Adviser and the services provided by the Sub-Adviser
hereunder.
(b) The Sub-Adviser shall be liable to the Fund for any loss
(including transaction costs) incurred by the Fund as a result of any
investment made by the Sub-Adviser in contravention of: (i) any investment
policy, guideline or restriction set forth in the Registration Statement or as
approved by the Board from time to time and provided in writing to the
Sub-Adviser; or (ii) applicable law, including but not limited to the 1940 Act
and the Code (including but not limited to the Fund's failure, with respect to
the Assets, to satisfy the diversification or source of income requirements of
Subchapter M of the Code) (the investments described in this subsection (b)
collectively are referred to as "Improper Investments").
(c) The Sub-Adviser shall indemnify and hold harmless the Trust, each
affiliated person of the Trust within the meaning of Section 2(a)(3) of the
1940 Act, and each person who controls the Trust within the meaning of Section
15 of the 1933 Act (any such person, an "Indemnified Party") against any and
all losses, claims, damages, expenses or liabilities (including the reasonable
cost of investigating and defending any alleged loss, claim, damage, expense or
liability and reasonable counsel fees incurred in connection therewith) to
which any such person may become subject under the 1933 Act, the 1934 Act, the
1940 Act or other federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages, expenses or liabilities
(or actions in respect thereof) arise out of or are based upon: (i) a breach by
the Sub-Adviser of this Agreement or of the representations and warranties made
by the Sub-Adviser herein; (ii) any Improper Investment; (iii) any untrue
statement or alleged untrue statement of a material fact applicable to the
Sub-Adviser that the Sub-Adviser has reviewed and approved pursuant to Section
7(c) contained in any Disclosure Document or the omission or alleged omission
from a Disclosure Document of a material fact applicable to the Sub-Adviser
required to be stated therein or necessary to make the statements therein not
misleading; or (iv) the Sub-Adviser's performance or nonperformance of its
duties hereunder. Nothing herein shall be deemed to protect any Indemnified
Party against any liability or expense to which such Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith,
12
gross negligence or reckless disregard of the duties involved in the conduct of
such person's office with the Trust or violation of applicable law.
14. ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
15. LIMITATION OF LIABILITY. The parties to this Agreement
acknowledge and agree that all litigation arising hereunder, whether direct or
indirect, and of any and every nature whatsoever shall be satisfied solely out
of the assets of the affected Fund and that no Trustee, officer or holder of
shares of beneficial interest of the Fund shall be personally liable for any of
the foregoing liabilities. The Trust's Certificate of Trust, as amended from
time to time, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts. Such Certificate of Trust and the Trust's
Agreement and Declaration of Trust describe in detail the respective
responsibilities and limitations on liability of the Trustees, officers, and
holders of shares of beneficial interest.
16. CHANGE IN THE ADVISER'S OWNERSHIP. The Sub-Adviser agrees that
it shall notify the Trust of any anticipated or otherwise reasonably
foreseeable change of greater than five percent (5%) in the ownership of the
Sub-Adviser within a reasonable time prior to such change being effected.
17. JURISDICTION. This Agreement shall be governed by and construed
in accordance with the substantive laws of the Commonwealth of Massachusetts
and the Sub-Adviser consents to the jurisdiction of courts, both state or
federal, in Massachusetts, with respect to any dispute under this Agreement.
18. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
19. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
20. NOTICES. All notices hereunder shall be given in writing (and
shall be deemed to have been duly given) by delivery in person, by facsimile or
by electronic means (with corresponding personal, facsimile or electronic
receipt of such delivery), or by registered or certified mail (with return
receipt requested), or by reputable overnight delivery service (with evidence
of receipt to the parties), at the address of each as set forth below (or at
such other address, number or electronic address for a party as shall be
specified by like notice):
13
If to the Sub-Adviser, to:
PENN Capital Management, Inc.
Address: 0 Xxxxxxxx Xxxxx, Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxx
Senior Managing Partner
Email: xxxxxx@xxxxxxxxxxx.xxx
Telephone:000-000-0000
If to the Adviser, to:
Xxxxxx Associates Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Vice President, Trust Advisory Group
Facsimile:303.832_8230
Email: xxxx@callameorn
Telephone: 000.000.0000
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
on their behalf by their duly authorized officers as of the date first above
written.
XXXXXX ASSOCIATES INC.
By: /s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: President and Director of Research
PENN CAPITAL MANAGEMENT COMPANY, INC.
By: /s/ Xxxxxxxxx X. Xxxxx
Name: Xxxxxxxxx X. Xxxxx
Title: Senior Managing Partner
15
SCHEDULE A
TO THE
SUB-ADVISORY AGREEMENT
DATED FEBRUARY 25TH, 2015 BETWEEN
XXXXXX ASSOCIATES INC.
AND
PENN CAPITAL MANAGEMENT COMPANY, INC.
Each Fund will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered, a fee, computed daily at an annual rate based on the average
daily net assets of the respective portion of the Fund (or "Assets" as defined
in this Agreement) as may be allocated by the Adviser to the Sub-Adviser from
time to time under the following fee schedule:
FUND RATE
KP Small Cap Equity Fund -- Active Micro Core [Redacted]%
Sub-Strategy
16
