EXECUTION COPY
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT, dated as of September 10, 2009 by and between Grail
Advisors, LLC, a Delaware limited liability company ("Manager"), and RiverPark
Advisors, LLC, a Delaware limited liability corporation ("Sub-Adviser").
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
WHEREAS, the Manager has entered into an Investment Management
Agreement dated September 10, 2009 with Grail Advisors ETF Trust ("Trust") an
investment company registered under the Investment Company Act of 1940, as
amended ("Investment Company Act");
WHEREAS, Sub-Adviser is registered as an investment adviser under the
Advisers Act;
WHEREAS, the Board of Trustees of the Trust (collectively, the
"Trustees," and each member individually, a "Trustee") and the Manager desire to
retain Sub-Adviser to render investment advisory and other services to the
series of the Trust listed on Appendix A hereto, as such Appendix A may be
amended from time to time (each, a "Fund" and collectively, the "Funds"), in the
manner and on the terms hereinafter set forth;
WHEREAS, the Manager has the authority under the Investment Management
Agreement to contract with the Sub-Adviser to provide investment advisory
services to each Fund; and
WHEREAS, Sub-Adviser is willing to contract with the Manager to furnish
such services to the Manager and each Fund;
NOW, THEREFORE, the Manager and Sub-Adviser agree as follows:
1. APPOINTMENT OF SUB-ADVISER
The Manager hereby appoints Sub-Adviser to act as the investment
adviser for each Fund, subject to the supervision and oversight of the Manager
and the Trustees, and in accordance with the terms and conditions of this
Agreement. Sub-Adviser will be an independent contractor and will have no
authority to act for or represent the Trust or the Manager in any way or
otherwise be deemed an agent of the Trust or the Manager except as authorized in
this Agreement or another writing by the Trust, the Manager and Sub-Adviser.
2. ACCEPTANCE OF APPOINTMENT
Sub-Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided, commencing on the
effective date of this Agreement or Appendix A, whichever is later, in
conformity with applicable laws and regulations, including, but not limited to,
the Investment Company Act and the Advisers Act and in accordance with each
Fund's investment objectives, policies and restrictions as stated in the Trust's
Trust Instrument, By-Laws and Compliance Manual and in each Fund's Prospectus
and Statement of Additional Information ("SAI"), as from time to time in effect.
3. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
A. Subject to the oversight and supervision of the Trustees, the
Manager will determine the percentage allocation of the assets of each Fund for
which Sub-Adviser will have investment responsibilities ("Allocated Portion").
As investment adviser to each Fund with responsibilities for the Allocated
Portion, Sub-Adviser will coordinate the investment and reinvestment of the
assets of the Allocated Portion, and determine the composition of the Allocated
Portion, subject always to the supervision and control of the Manager and
Trustees.
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B. As part of the services it will provide hereunder, Sub-Adviser will
do the following for each Fund:
(i) Scope of Authority. Subject to supervision by the Manager
and Trustees, Sub-Adviser will provide a continuous investment program
for the Allocated Portion and determine, for the Allocated Portion,
what securities and other investments will be purchased, retained, sold
by the Fund and what portion of such assets will be invested or held
uninvested as cash. Sub-Adviser will exercise discretion and act for
the Allocated Portion in the same manner and with the same force and
effect as the Fund itself might or could do with respect to purchases,
sales, or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions.
(ii) Exercise of Rights. Unless and until otherwise agreed to
by the Manager or Trustees, the Sub-Adviser shall be responsible for
exercising all rights of security holders with respect to securities
in the Allocated Portion, including, but not limited to, voting
proxies, and the Manager shall have no such responsibilities.
(iii) Securities Lending Activity. To the extent that any
Fund engages in securities lending, Sub-Adviser shall provide the
following services with respect to securities lending activities: (i)
assist the securities lending agent for each such Fund (the "Agent")
to determine which securities are available for loan, (ii) monitor the
Agent's activities to ensure that securities loans are effected in
accordance with Sub-Adviser's instructions and in accordance with
applicable procedures and guidelines adopted by the Trustees, (iii)
prepare appropriate periodic reports for, and seek appropriate
periodic approvals from, the Trustees with respect to securities
lending activities, (iv) respond to Agent inquiries concerning Agent's
activities, and (v) such other related duties as may be necessary or
appropriate.
(iv) Selection of Broker-Dealers and Execution of
Transactions. To the extent that transactions are effected in the
Allocated Portion, Sub-Adviser shall be responsible for effecting such
transactions and selecting brokers or dealers to execute such
transactions for the Allocated Portion. In the selection of brokers or
dealers (which may include brokers or dealers affiliated with
Sub-Adviser) and the placement of orders for the purchase and sale of
portfolio investments for the Allocated Portion, Sub-Adviser shall use
its best efforts to obtain the best execution available, except to the
extent that it may be permitted to pay higher brokerage commissions for
brokerage or research services as described below. In using its best
efforts to obtain the best execution available, Sub-Adviser, bearing in
mind the Fund's best interests at all times, shall consider all factors
it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount
of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial
stability of the broker or dealer involved and the quality of execution
and research services provided by the broker or dealer. Subject to such
policies as the Trustees may determine, Sub-Adviser shall not be deemed
to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Fund
to pay a broker or dealer that provides brokerage or research services
to Sub-Adviser an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if
Sub-Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage or research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or Sub-Adviser's overall responsibilities
with respect to the Fund and to other clients of Sub-Adviser as to
which Sub-Adviser exercises investment discretion. The Trust hereby
agrees that any entity or person associated with Sub-Adviser which is a
member of a national securities exchange is authorized to effect any
transaction on such exchange for the account of the Trust which is
permitted by Section 11(a) of the Securities Exchange Act of 1934, as
amended, and the Trust hereby consents to the retention of compensation
for such transactions.
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On occasions when the Sub-Adviser deems the purchase or sale
of a security to be in the best interest of the Fund as well as other
clients of the Sub-Adviser, to the extent permitted by applicable laws
and regulations, the Sub-Adviser may, but shall be under no obligation
to, aggregate the securities to be purchased or sold to attempt to
obtain a more favorable price or lower brokerage commissions and
efficient execution. The Manager acknowledges that the Sub-Adviser is a
fiduciary to other clients, some of which have the same or similar
investment objectives and will hold the same or similar investments as
a Fund. The Manager further acknowledges that, notwithstanding the
sameness or similarity of the investment objectives and/or investments
of a Fund relative to those of another client of Sub-Adviser, the
Sub-Adviser may give advice and take action in the performance of its
duties with respect to other clients that may differ from the advice
given, or the timing or nature of actions taken, with respect to the
Fund.
(v) Reports. Sub-Adviser shall keep the Trustees and the
Manager fully informed in writing on an ongoing basis of all material
facts concerning the investment and reinvestment of the Allocated
Portion, as well as the Sub-Adviser and its key personnel and
operations, make regular and periodic special written reports of such
additional information concerning the same as may reasonably be
requested from time to time by the Manager or the Trustees, and attend
meetings with the Manager and/or the Trustees, as reasonably requested,
to discuss the foregoing.
(vi) Fair Valuation. In accordance with procedures and methods
established by the Trustees, which may be amended from time to time,
Sub-Adviser shall provide assistance in determining the fair value of
all securities and other investments/assets in the Allocated Portion,
as necessary, and use reasonable efforts to arrange for the provision
of valuation information or a price(s) from a party(ies) independent of
Sub-Adviser for each security or other investment/asset in the
Allocated Portion for which market prices are not readily available.
C. In furnishing services hereunder, Sub-Adviser agrees and
acknowledges the following:
(i) Facilities and Personnel. Sub-Adviser shall provide all
necessary facilities and personnel, including salaries, expenses and
fees of any personnel required for Sub-Adviser to faithfully perform
its duties under this Agreement. In addition, Sub-Adviser shall
provide all administrative facilities, including bookkeeping, and all
equipment necessary for the efficient conduct of Sub-Adviser's duties
under this Agreement.
(ii) Cooperation with Trust Agents. Sub-Adviser shall
cooperate with and provide reasonable assistance to the Manager, the
Trust's administrator, any Trust custodian or foreign sub-custodians,
the Trust's transfer agent and pricing agents and all other agents and
representatives of the Trust and the Manager, keep all such persons
fully informed as to such matters as they may reasonably deem necessary
to the performance of their obligations to the Trust and the Manager,
provide prompt responses to reasonable requests made by such persons
and maintain any appropriate interfaces with each so as to promote the
efficient exchange of information.
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4. COMPENSATION OF SUB-ADVISER
For its services performed hereunder, the Manager will pay Sub-Adviser
with respect to the Allocated Portion of a Fund the compensation specified in
Appendix A to this Agreement. Such compensation shall be paid to Sub-Adviser by
the Manager quarterly; however, the Trust will calculate this charge on the
average daily net asset value of the Allocated Portion and accrue it on a daily
basis. If this Agreement becomes effective or terminates with respect to a Fund
before the end of any quarter, the fee for the period from the effective date to
the end of the quarter or from the beginning of the quarter to the date of
termination, as the case may be, shall be prorated according to the proportion
that such period bears to the full quarter in which such effectiveness or
termination occurs.
5. NON-EXCLUSIVITY
The services of Sub-Adviser to the Manager, the Funds and the Trust are
not to be deemed to be exclusive, and Sub-Adviser shall be free to render
investment advisory or other services to others and to engage in other
activities, so long as the services provided hereunder by Sub-Adviser are not
impaired. It is understood and agreed that the directors, officers, and
employees of Sub-Adviser are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers, directors, trustees, or employees of any other firm or
corporation.
6. LIMITATIONS ON LIABILITY; INDEMNIFICATION
A. Sub-Adviser. Sub-Adviser will exercise its best judgment in
rendering its services to the Trust, and the Trust agrees, as an inducement to
Sub-Adviser's undertaking to do so that, except as may otherwise be provided by
the Investment Company Act or any other federal securities law, neither
Sub-Adviser nor any of its officers, members or employees (its "Affiliates")
shall be liable for any losses, claims, damages, liabilities or litigation
(including legal and other expenses) incurred or suffered by the Manager or the
Trust as a result of any error of judgment or mistake of law by Sub-Adviser or
its Affiliates with respect to the Funds, except that nothing in this Agreement
shall operate or purport to operate in any way to exculpate, waive or limit the
liability of Sub-Adviser or its Affiliates for, and Sub-Adviser shall indemnify
and hold harmless the Trust, the Manager, all affiliated persons thereof (within
the meaning of Section 2(a)(3) of the Investment Company Act) and all
controlling persons (as described in Section 15 of the Securities Act of 1933,
as amended ("1933 Act")) (collectively, "Manager Indemnitees") against any and
all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses) to which any of the Manager Indemnitees may become
subject under the 1933 Act, the Investment Company Act, the Advisers Act, or
under any other statute, or common law or otherwise arising out of or based on
(i) any willful misconduct, bad faith, reckless disregard or gross negligence of
Sub-Adviser in the performance of any of its duties or obligations hereunder or
(ii) any untrue statement of a material fact contained in the Prospectus and
SAI, proxy materials, reports, advertisements, sales literature, or other
materials pertaining to the Funds or the omission to state therein a material
fact known to Sub-Adviser which was required to be stated therein or necessary
to make the statements therein not misleading, if such statement or omission was
made in reliance upon information furnished directly or indirectly to the
Manager or the Trust by Sub-Adviser Indemnitees (as defined below) for use
therein.
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The assets of the Funds will be maintained in the custody of a
custodian (who shall be identified by the Manager in writing). Sub-Adviser will
not have custody of any securities, cash or other assets of the Funds and will
not be liable for any loss resulting from any act or omission of the custodian
other than acts or omissions arising in reliance on instructions of Sub-Adviser.
B. Manager and Trust. Except as may otherwise be provided by the
Investment Company Act or any other federal securities law, the Manager and the
Trust shall not be liable for any losses, claims, damages, liabilities or
litigation (including legal and other expenses) incurred or suffered by
Sub-Adviser as a result of any error of judgment or mistake of law by the
Manager with respect to the Funds, except that nothing in this Agreement shall
operate or purport to operate in any way to exculpate, waive or limit the
liability of the Manager for, and the Manager shall indemnify and hold harmless
Sub-Adviser, all affiliated persons thereof (within the meaning of Section
2(a)(3) of the Investment Company Act) and all controlling persons (as described
in Section 15 of the 1933 Act) (collectively, "Sub-Adviser Indemnitees") against
any and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) to which any of the Sub-Adviser Indemnitees
may become subject under the 1933 Act, the Investment Company Act, the Advisers
Act, or under any other statute, at common law or otherwise arising out of or
based on (i) any willful misconduct, bad faith, reckless disregard or gross
negligence of the Manager in the performance of any of its duties or obligations
hereunder or (ii) any untrue statement of a material fact contained in the
Prospectus and SAI, proxy materials, reports, advertisements, sales literature,
or other materials pertaining to the Funds or the omission to state therein a
material fact known to the Manager that was required to be stated therein or
necessary to make the statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Manager or the
Trust by a Manager Indeminitee for use therein.
C. Trustees and Shareholders. The Manager and Sub-Adviser are hereby
expressly put on notice of the limitation of shareholder liability as set forth
in the Trust Instrument and agree that obligations assumed by the Trust pursuant
to this Agreement shall be limited in all cases to the Trust and its assets, and
if the liability relates to one series, the obligations hereunder shall be
limited to the respective assets of that series. The Manager and Sub-Adviser
further agree that they shall not seek satisfaction of any such obligation from
the shareholders or any individual shareholder of the Funds, nor from the
Trustees or any individual Trustee of the Trust.
D. Consequential Damages. Neither party shall be liable to the other
party for consequential damages under any provision of this Agreement.
7. BOOKS AND RECORDS
Sub-Adviser will maintain all accounts, books and records with respect
to the Funds as are required of an investment adviser of a registered investment
company pursuant to the Investment Company Act and the Advisers Act and the
rules thereunder and shall file with the SEC all forms pursuant to Section 13 of
the Exchange Act, with respect to its duties as are set forth herein.
The records relating to the services provided under this Agreement
shall be the property of the Trust and shall be under its control; however, the
Trust shall furnish to Sub-Adviser such records and permit it to retain such
records (either in original or in duplicate form) as it shall reasonably require
in order to carry out its business. In the event of the termination of this
Agreement, such other records shall promptly be returned to the Trust by
Sub-Adviser free from any claim or retention of rights therein, provided that
Sub-Adviser may retain any such records that are required by law or regulation,
or as it may otherwise reasonably request. The Manager and Sub-Adviser shall
keep confidential any information obtained in connection with its duties
hereunder and disclose such information only if the Trust has authorized such
disclosure or if such disclosure is expressly required or requested by
applicable federal or state regulatory authorities, or otherwise required by
law.
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8. DURATION OF AGREEMENT
With respect to each Fund, this Agreement shall become effective upon
the date indicated above or in Appendix A, provided that this Agreement shall
not take effect unless it has been approved: (i) by a vote of a majority of
those Trustees who are not "interested persons" (as defined in the Investment
Company Act) ("Independent Trustees") of any party to the Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of such Fund's outstanding securities. The Agreement will
continue in effect two years from the date of its effectiveness and may be
continued for successive annual periods thereafter so long as such continuance
is specifically approved at least annually either by (i) the Trustees or (ii) by
the vote, as appropriate, of either a majority of the outstanding voting
securities of the Trust or a majority of the outstanding voting securities of
any affected Fund.
9. AMENDMENTS TO THE AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no material amendment of this Agreement as to a given Fund shall be
effective until approved by the Trustees and such Fund shareholders to the
extent required by the Investment Company Act.
10. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time, without the payment of
any penalty, (i) by the Trustees, including a majority of the Independent
Trustees, or by the vote of a majority of the outstanding voting securities of a
Fund, on sixty (60) days' written notice to the Manager and Sub-Adviser, or (ii)
by the Manager or Sub-Adviser, on sixty (60) days' written notice to the Trust
and the other party. This Agreement will automatically terminate, without the
payment of any penalty, in the event of its assignment (as defined in the
Investment Company Act).
11. REPRESENTATIONS OF THE MANAGER
The Manager represents, warrants and agrees that:
A. The Manager has been duly authorized by the Trustees to delegate to
the Sub-Adviser the provision of investment services to the Funds as
contemplated hereby;
B. Prior to the commencement of Sub-Adviser's services hereunder, the
Manager shall provide Sub-Adviser with current copies of the Trust's Trust
Instrument, By-Laws and Compliance Manual, as well as each Fund's Prospectus and
SAI, as well as other relevant policies and procedures that have been adopted by
the Trustees; and
C. Manager will notify Sub-Adviser if a change of control or management
of Manager is anticipated. Sub-Adviser shall not be responsible for the expenses
of the Trust, if any, arising out of an assignment by or change of control of
Manager.
12. REPRESENTATIONS OF SUB-ADVISER
A. Sub-Adviser will notify the Manager if it fails to be registered as
an investment adviser under the Advisers Act or under the laws of any
jurisdiction in which Sub-Adviser is required to be registered as an investment
adviser in order to perform its obligations under this Agreement;
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B. Sub-Adviser will notify the Manager if it is served or otherwise
receives notice of any action, suit, proceeding, inquiry or investigation, at
law or in equity, before or by any court, public board or body, involving the
affairs of the Trust or involving Section 9 of the Investment Company Act; and
C. Sub-Adviser will notify the Manager if a change in control or
management of Sub-Adviser is anticipated. Sub-Adviser agrees to bear all
reasonable expenses of the Trust, if any, arising out of an assignment by or
change in control of Sub-Adviser.
13. NAMING RIGHTS
The parties agree that the name of Sub-Adviser, the names of any
affiliates of Sub-Adviser and any derivative or logo or trademark or service
xxxx or trade name are the valuable property of Sub-Adviser and its affiliates.
The Manager and the Trust shall have the right to use such name(s), derivatives,
logos, trademarks or service marks or trade names only with the prior written
approval of Sub-Adviser, which approval shall not be unreasonably withheld or
delayed so long as this Agreement is in effect.
Upon termination of this Agreement, the Manager and the Trust shall
forthwith cease to use such name(s), derivatives, logos, trademarks or service
marks or trade names, including but not limited to the names of the Funds. In
addition, upon termination of this Agreement, the Manager and the Trust shall
forthwith cease to use the Funds' ticker symbols, as indicated on Appendix A.
The Manager and the Trust agree that they will review with Sub-Adviser any
advertisement, sales literature, or notice prior to its use that makes reference
to Sub-Adviser or its affiliates or any such name(s), derivatives, logos,
trademarks, service marks or trade names so that Sub-Adviser may review the
context in which it is referred to.
14. FORCE MAJEURE
Manager and Sub-Adviser shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, Manager shall take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of Delaware (without giving effect to its
conflict of laws principles), or any of the applicable provisions of the
Investment Company Act. To the extent that the laws of the State of Delaware, or
any of the provisions in this Agreement, conflict with applicable provisions of
the Investment Company Act, the latter shall control. 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 SEC validly issued pursuant to the Investment
Company Act. Specifically, the terms "vote of a majority of the outstanding
voting securities," "interested persons," "assignment," and "affiliated
persons," as used herein shall have the meanings assigned to them by Section
2(a) of the Investment Company Act unless otherwise stated herein. In addition,
where the effect of a requirement of the Investment Company Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
SEC, whether of special or of general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
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16. HEADINGS
The headings in the sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
17. INTERPRETATION
Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Trust Instrument or By-Laws, or any applicable
statutory or regulatory requirements to which it is subject or by which it is
bound, or to relieve or deprive the Trustees of their responsibility for and
control of the conduct of the affairs of the Trust.
18. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void
in law or in equity, the Agreement shall be construed, insofar as is possible,
as if such portion had never been contained herein.
19. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties with respect to advisory services to be provided to the Funds.
20. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Manager, Trust and
Sub-Adviser by registered or a private mail or delivery service providing the
sender with notice of receipt. Notice shall be deemed given on the date
delivered in accordance with this paragraph.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first mentioned above.
GRAIL ADVISORS, LLC RIVERPARK ADVISORS, LLC
By: _______________________ By: ____________________________
Name: Xxxxxxx X. Xxxxxx Name: Xxxxx Xxxxxx
Title: Chief Executive Officer Title: Chief Executive Officer
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APPENDIX A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
September 10, 2009
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Management Fee
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Fund/Ticker Fee
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RP Growth ETF (RPX) 0.50%
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RP Technology ETF (RPQ) 0.50%
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RP Financials ETF (RFF) 0.50%
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